Brokers’ take: UOBKH raises PropNex target price to S$1.16

UOB Kay Hian (UOBKH) has raised its target price on real estate agency PropNex to S$1.16, from S$1.07 previously. It is bullish on the company’s planned foray into the commercial property segment, which will add to its strength in the residential property market.

The brokerage has maintained its “buy” call on the counter. 

The new target price is based on a price-to-earnings (PE) multiple of 11.1 times, and one standard deviation above the company’s average PE of 9.1 times over the 2021-2023 period. 

UOBKH said it had previously used a timeframe of 2018-2023 for PropNex’s average PE. This was, however, not applicable now, as the average PE would be dragged down by the low PE multiples of three to four times in 2020. 

It added that using a PE multiple one standard deviation above average was reasonable on the basis of its “(great) confidence in the company’s ability to maintain and grow its market share”. 

Analyst Adrian Loh said that in the medium term, PropNex’s earnings could be boosted by new growth plans to enter the commercial market with the establishment of a consultancy arm, which will offer leasing and valuation consultancy services. 

The company “appears to be in a strong position” in the residential property segment, said Loh, noting that the number of agents had increased 8 per cent year on year to nearly 12,000 agents in 2022. 

“PropNex remains the go-to stock for exposure to Singapore’s residential property market, given its dominant market share.” 

The analyst said that strong sales numbers at recent launches such as The Reserve Residences and Blossoms By The Park are a sign that recent Additional Buyer’s Stamp Duty hikes had little to no impact on local demand, a “positive for PropNex in our view”. 

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He also noted that the company ended the year 2022 in a net cash position of S$139 million, which represents over one-fifth of the company’s market capitalisation, even after paying out nearly S$50 million in dividends. 

The mainboard-listed company traded down 1.9 per cent or S$0.02 at S$1.05 as at 2.11 pm on Wednesday.