PropNex - SAC Capital 2021-11-19: A Tireless Property Market


PropNex - A Tireless Property Market

  • PropNex (SGX:OYY)'s 9M21 revenue accounted for 87.9% of our previous estimates, and 9M21 net profit surpassed our forecasts by 15.6%.
  • PropNex reported that its 9M21 revenue almost doubled, increasing from S$358.4m in 9M20 to S$715.5m in 9M21 mainly from higher commission income on the back of higher transactions done. Agency services accounted for S$387.5m and project marketing S$325.9m of revenue. Profit from continuing operations rose by 2.2x from S$22.8m to S$49.8m.

Going strong

  • The higher number of transactions for resale units came on the back of lower demand for BTOs due to construction delays. We expect this will continue into 2022. Higher new home and resale prices and a strong upgrader market due to attractive HDB resale prices were other drivers. For new projects, home prices will be expected to be remain strong with higher developer costs coming about with high land prices.
  • PropNex's management said that FY21 dividend payout is expected to be in the range of 75%-80% of PATMI. Accordingly, we raised our final dividend estimate to 7.50 cents. PropNex's 1H21 dividend was 5.50 cents per share.

Adjusted our FY21E and FY22E forecasts.

  • With its strong 9M21 results, we have adjusted our FY21E revenue estimates for PropNex up 13.4% to S$923.0m, and FY22E up 15.5% to S$790.1m to reflect other potential drivers, which are:
    1. higher headcount which can increase market share, and
    2. border reopening could increase foreign investments.
  • Accordingly, our FY21E PATMI forecast for PropNex has been adjusted up 14.2% to S$61.2m, and FY22E up 15.3% to S$49.7m.

Maintain HOLD rating, at lower fair value of S$1.94 (from S$2.00).

  • Our target price for PropNex is based on a P/E multiple of 13.68x, which is based on forward 12-month P/E +1 standard deviation above its mean, based on past 10 quarters of average P/E. We are positive about its market leadership, strong cash holdings and market’s high property prices. FY2021 has been a strong year for PropNex, but we think earnings might be peak. The market has also largely priced in PropNex’s strong valuations.
  • We continue to expect strength in property prices to sustain in the near term. However, sales volumes have been seeing weakness in recent months. Further, the dwindling supply in the pipeline and fewer new launches expected points to lower transaction volume next year. Our target price implies a 4.3% upside to PropNex's last traded share price.
  • Key Risks: Dwindling home supply, possible property cooling measures, strong growth rate might not sustain.
  • See

Lim Li Jun Tracy SAC Capital Research | https://www.saccapital.com.sg/ 2021-11-19
SGX Stock Analyst Report HOLD MAINTAIN HOLD 1.94 DOWN 2.000