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Broker's take: APAC Realty earns 'buy' from RHB on initial coverage
SURGING residential sales, a strong pipeline of projects and attractive dividend yield are some of the factors which has earned APAC Realty a "buy" recommendation from RHB Research in its initial coverage of the real estate services provider.
The broker has put forth a target price of S$1.20 for the stock based on a discounted cash flow valuation, translating into 15 times price-to-earnings (P/E) ratio for fiscal 2018, a 15 per cent discount to comparable global peers' forward P/E.
The counter was trading at S$0.895 as at 9.44am on Thursday, up 1.13 per cent. The stock has seen a 52-week low/high price of S$0.66 and S$0.96 respectively.
APAC Realty operates under the ERA brand, which made a return to public trading on Sept 28, 2017 after ERA's holding company, Hersing Realty, was delisted in November 2012.
RHB forecasts the sales increase in Singapore's residential market will help APAC Realty ride the "strong buying momentum" generated from Singapore's primary home - excluding executive condominiums (ECs) - and secondary sales, which have increased by 45 per cent and 67 per cent respectively year on year.
The broker also cited the group's growing market share of projects in Singapore, which increased to 37.5 per cent in 2016 from 25.7 per cent in 2012.
"The outlook for this segment seems bright, with ERA Realty already securing 10 projects for launch in 2018 of circa 10,000 units," RHB said.
RHB also calculated the stock offers a 4.4 per cent dividend yield, and that APAC Realty intends to pay out at least 50 per cent of after-tax net profits as dividends for the 2017 financial year, counting from its listing date.
The property group has also no debt as at the fiscal third quarter, and RHB cites the group's "strong" net cash position of S$48.1 million and low capex (capital expenditure) requirements as strong foundations for growth through future acquisitions and higher dividends.