Brokers’ take: CGS-CIMB cuts Apac Realty target price on decline in market share

CGS-CIMB cut its target price on real estate services provider Apac Realty to S$0.84 from S$0.93 amid a decline in its market share.

In a report on Friday (Jun 17), analyst Lock Mun Yee cut her earnings per share estimates for Apac Realty by 12.9 per cent in FY2022, 5.3 per cent in FY2023 and 4.8 per cent in FY2024, as she expects a moderated market share for project marketing in the respective years.

But Lock maintained her “add” call on the counter, as she expects Apac Realty’s share price will be supported by a projected dividend yield of 10.4 per cent in FY2022.

Shares of Apac Realty were trading at S$0.60 as at 10.24 am on Monday, up S$0.005 or 0.8 per cent.

Lock noted that Apac Realty recorded higher new home brokerage in its FY2022 first quarter results, although this was partly offset by lower resale and rental brokerage as well as other revenue.

While the company managed to grow its market share for private resale transactions and rentals in the first quarter, it lost market share for HDB resale transactions, and saw its market share for new projects falling, the analyst noted.

Lock, however, expects the completion of the mandatory general offer by NHPEA Ace Realty Company could result in a strategic and operational review of the company to unlock growth potential.

NHPEA, a fund managed by Morgan Stanley Private Equity Asia, acquired a 59.8 per cent stake in APAC Realty in April for S$129.5 million. It also made a mandatory general offer for the real estate services provider at an offer price of S$0.57 in cash, which closed on Jun 10 with the NHPEA owning, controlling or agreeing to acquire around 64.8 per cent of Apac Realty’s shares.

Meanwhile, DBS Group Research, it noted that Apac Realty’s first quarter performance was above expectations, although it was inline with the overall property market.

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The research team expects a muted outlook ahead, amid the rising interest rate environment, a growing risk of the economy slipping into a recession, and a lower number of new launches compared to a year earlier.

It maintained its “hold” call and target price of S$0.67 on the counter.

Mainboard-listed APAC Realty on Friday posted a 20 per cent on-year growth in net profit to S$9 million for its first quarter ended Mar 31, in tandem with an 11.8 per cent on-year jump in revenue.