MAYBANK downgraded PropNex : OYY 0% to “hold” from “buy” and lowered its target price by 18.3 per cent to S$0.94 from S$1.15, as it sees limited upside on the stock.

The move comes after the real estate agency’s net profit for the second half of 2023 came in below expectations for the research team, amid softer buying sentiment in the property sector.

Transaction volumes cooled following rounds of property cooling measures since December 2021, noted Maybank in a report released on Wednesday (Feb 28).

PropNex posted a 27.1 per cent fall in net profit for the six months ended December 2023 to S$25.8 million, from S$35.3 million in the year-ago period. This came as revenue declined 14.9 per cent to S$473.8 million, from S$556.9 million previously.

Despite the company’s H2 revenue and net profit registering growth compared with H1, it was not enough to compensate for the caution by prospective homebuyers amid recent cooling measures, high interest rates and macroeconomic uncertainties, said PropNex chief executive Ismail Gafoor.

Although a healthy pipeline of new launches supported H2 2023 revenue, the rebound was not as strong as expected for Maybank. It took particular concern with new private home sales numbers, which fell to a 15-year low despite more units being launched.

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PropNex, which provides real estate brokerage, training and real estate consultancy services, expects a slower price growth of 3 to 4 per cent in 2024 for the private homes segment and sales volume of between 7,000 and 7,500 units.

For the mass market Housing and Development Board resale flats segment, prices are expected to rise by 4 to 5 per cent, with stable volumes of around 26,000 to 27,000 units.

Following the results, Maybank cut its earnings per share estimates for PropNex by 18 to 21 per cent for the 2024 to 2025 fiscal years. It does not expect sales volume to pick up until 2025.

Its target price of S$0.94 implies a potential upside of 6.8 per cent from PropNex’s last trading price of S$0.88 as at 11.20 am on Thursday. Its shares were down 2.2 per cent or S$0.02 at the time.

Any downside in share price should be supported by PropNex’s “decent yield” of over 6 per cent, supported by the group’s solid balance sheet, Maybank noted.

PropNex’s cash and bank balances stood at S$148.1 million as at end-2023, which should continue to support the group’s high dividend payout annually despite a slowdown in earnings growth momentum. It also plans to expand its sales force to 15,000 by 2026 to further grow its market share.