APAC REALTY LIMITED (SGX:CLN)
APAC Realty - Change Of Major Shareholder
- Morgan Stanley Private Equity (MSPE) has acquired majority stake in APAC Realty (SGX:CLN) from Northstar Group at S$0.57/share – a 29% discount to the closing price. MSPE will make a mandatory offer at the same price to all unitholders. We recommend unitholders to not accept this general offer as it is significantly below our target price and long-term value.
- While APAC Realty's share price is likely to see a kneejerk reaction, we see S$0.65 and below as a good long-term entry level. Stay NEUTRAL on APAC Realty with S$0.75 target price, 7% downside.
Transfer of major shareholder.
- MSPE announced the acquisition of a ~59.8% stake from Northstar, the group that led the buyout of APAC Realty’s ERA Singapore from Hersing Corp for S$130m in 2013 (see Northstar buyout for details). Since then, Northstar has enjoyed a steady stream of annual dividends and will be exiting the investment at an estimated 56% gains over its purchase price (excluding dividends).
- We believe the entry of MSPE – one of the world’s largest investment managers (US$1.6trn assets under management as at end Dec 2021) – is likely to bring in more M&A opportunities for the company and will help further in its Asia-Pacific expansion plans.
- The management team – Executive Chairman Jack Chua, key Executive Officer Eugene Lim, and CFO Poh Chee Yong (who collectively hold > 10% of APAC Realty) – will not be tendering their shares and remain committed to its long-term growth.
Offer an opportunistic one and undervalues the long-term potential.
- We believe the offer price of S$0.57 per APAC Realty share (6x FY21F and 9x FY22F P/Es) is low and significantly undervalues APAC Realty’s long-term potential. The move comes amidst the latest round of cooling measures (Dec 2021) that is impacting sales volumes with an expected 20-30% decline in overall transaction volumes this year.
- However, we note that the underlying Singapore property market fundamentals remain robust and well supported by healthy GDP growth and strong household balance sheets. In our view, Northstar’s exit, which comes after > 8 years of initial investment, is possibly to redeploy the proceeds into other market opportunities.
Attractive 6% yield and net cash position.
- We believe downside risks to share price are limited by APAC Realty’s attractive dividend potential, asset-light business model and net cash position, which puts the company in a good position to ride out any near-term volatilities. Management has also set a target to increase its agent count to 10,840 by 2025 – a 10% CAGR growth – along with improving its technology capabilities.
- See
- We assign an ESG Score of 2.9 out of 4.0 based on our proprietary in-house methodology. As this score is in line – one notch below our median score – we have not applied a 2% discount to our DCF-derived intrinsic value.
Singapore Research
RHB Securities Research
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https://www.rhbinvest.com.sg/
2022-04-26
SGX Stock
Analyst Report
0.75
SAME
0.75
