Brokers’ take: DBS upgrades local property plays amid rosy industry outlook

Russell Marino Soh
Published Fri, Nov 11, 2022 · 04:57 PM

DBS Group Research has upgraded its calls on PropNex and Apac Realty to “hold” from “fully valued”, citing a “resilient” property market with a “strong pipeline of new launches, stable prices and demand”.

The research house raised its target price for PropNex to S$1.61 from S$1.19, based on a price-to-equity (PE) multiple for FY2023 of 11 times, which is one standard deviation above its historical mean. Earnings per share for FY2022 were estimated at S$0.15.

PropNex had on Wednesday (Nov 9) announced a net profit of S$17.6 million for the first nine months of 2022, up from S$14.4 million in the year-ago period.

DBS also raised its target price for Apac Realty to S$0.59 from S$0.41, pegged to a PE multiple for FY2023 of eight times, which is near its average four-year PE multiple. Earnings per share for FY2022 were estimated at S$0.073.

Apac Realty, which holds the ERA regional master franchise rights, had on Wednesday reported earnings of S$23.9 million for the first nine months of 2022, down from S$26.1 million a year ago.

DBS analyst Ling Lee Keng noted PropNex’s “growing dominance” in the local property market, with estimated market shares of 57 per cent, 52 per cent and 60 per cent in the private new launch, private resale, and public resale markets respectively, for FY2022.

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By contrast, ERA’s overall market share in the local property market is estimated at 37.5 per cent for FY2022.

Following the latest round of property cooling measures, Ling expects both PropNex and Apac Realty to perform weaker in the next two quarters. Nonetheless, she said that this adjustment period is much shorter than with past rounds of cooling measures.

Ling noted that private residential resale transactions will likely be hampered by the newly-imposed 15-month wait-out period, limiting available stock.

“The latest cooling measures (also) affect the loan quantum for HDB buyers, and could potentially delay cash-rich private home downgraders from entering the HDB resale market,” she added.

However, she anticipates that the cooling measures may not have a large impact on the two companies overall, given the “strong supply pipeline” of new launches in 2023, with about 11,000 units for PropNex and more than 8,000 units for Apac Realty.

Ling also highlighted that higher selling prices will continue to hold up revenue, although the pace of increase is expected to be “moderate” moving forward.

As at 4.34 pm on Friday, shares of PropNex : OYY 0% had gained 4.1 per cent or S$0.06 to S$1.53. Apac Realty : CLN 0% had risen 0.9 per cent or S$0.005 to S$0.565.



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