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PropNex Q2 net profit up 3.9% despite IPO-related costs

REAL estate agency PropNex has turned in a second-quarter showing spurred on by the property price recovery in the first half of 2018.

Net profit stood at S$4.2 million for the three months to June 30, an increase of 3.9 per cent on the previous year, according to unaudited results released on Wednesday. The company said that earnings, including minority interests, would have grown by 26 per cent from S$4.6 million to nearly S$5.8 million if S$1.1 million in listing-related expenses were excluded.

Revenue swelled by 60.3 per cent to S$121.6 million in the same period on higher commission income from agency services and project marketing services, which PropNex said in its financial statement "was the result of a more active Singapore residential property market".

"In view that sale transactions for newly launched and resale properties take up to three months to be exercised and billed, a portion of the group's earnings for transactions may only be recognised in the ensuing quarter," PropNex said in its media statement.

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It pointed to the possibility of a later recognisation of sales from the launches of The Tapestry and 8 Hullet in March, as well as Rivercove Residences in April, Twin Vew in May and Margaret Ville and Garden Residences in June.

The company said that it expected to launch 15 projects by year-end for 5,462 units altogether and has planned to start operations in Vietnam in the third quarter. It already has an overseas footprint in Indonesia and Malaysia.

With surprise property cooling measures having kicked in overnight on July 6, PropNex noted the last-minute surge of new home sales in July but warned in its outlook statement: "While the market sees a continued positive price growth and transactional volume in H1 2018, the impact of the latest cooling measures is expected to be felt possibly only in H2 2018.

"At recent launches, developers are reducing their property prices, factoring in the increase in the Additional Buyer's Stamp Duty that buyers will incur. With this announcement of cooling measures, we may expect subdued demand in the coming quarters from buyers, who will evaluate their options post-cooling measures."

Still, the company said that it expected the private residential resale segment to do well in the second half of the year on demand from buyers seeking replacement homes after collective sales. The public housing resale segment is also expected to benefit from some of these displaced buyers.

Ismail Gafoor, executive chairman and chief executive, said in a statement: "We have already seen strong sales in the private secondary market in the first half of the year and we expect this trend to continue in the coming quarters. From our perspective, PropNex will strategically position its resources to harness the growth potential in both the private primary and secondary markets."

Earnings per share was 1.14 Singapore cents, an uptick from 1.09 Singapore cents previously, while net asset value was 15.63 Singapore cents a share, against 4.89 Singapore cents as at Dec 31, 2017.

No dividend was recommended for the quarter.

Net profit rose by 51.3 per cent for the six months, to S$10.4 million, while half-year revenue came in higher by 67.4 per cent at S$224.4 million, on the real estate market boom.

Mr Ismail said: "Over the past 18 years, the group has demonstrated that it continues to perform well and has remained sustainable despite the implementation of several rounds of property cooling measures. We have laid a strong foundation for PropNex. Being the agency with the  largest salesforce, and having robust training programmes, which have produced a highly skilled salesforce, are key cornerstones of our success.

"We will capitalise on these competitive advantages to ride out the latest slew of property curbs."

PropNex debuted on the mainboard on July 2, reaping net proceeds of about S$38.3 million from its initial public offering.

The counter ended lower by S$0.01, or 1.65 per cent, at S$0.595, before the results.