Strong demand and tight supply in Singapore’s property market has seen APAC Realty double both its earnings and revenue for the 1HFY2021 ended June 30. This volume transaction upswing is expected to continue for the company, writes CGS-CIMB Research analyst Lock Mun Yee.
In an Aug 13 note Lock is maintaining “add” on the company, with a raised target price of 96 cents, up from 94 cents previously. The new target price represents a 7.8% upside.
“Given the low interest rate environment and declining quantum of unsold inventory, we believe that buying interest should remain strong. With the majority of these projects located in the city fringe and suburban areas, we believe these projects are likely to be well-received when marketed, in our view. As such, we believe APAC’s performance should continue to benefit from the volume transaction upswing,” says Lock.
The company has also planned to pay an interim dividend of 3.5 cents per share, plus a special dividend of 3 cents, for a total of 6.5 cents, representing a payout ratio of 73%.
See: APAC Realty doubles 1HFY2021 earnings, special dividend for shareholders and special bonus for staff
Noting this “big dividend surprise”, Lock also notes that APAC Realty has established a policy of distributing 50- 80% of its profits as dividends, on a semi-annual basis.
APAC Realty is one of the leading players in the real estate brokerage industry in Asia. APAC Realty operates three main business segments: the real estate brokerage services; franchise arrangements; and training, valuation and other ancillary services. APAC Realty holds the exclusive ERA regional master franchise rights for 17 countries in Asia Pacific.
APAC Realty generated $220.1 million, or 61.7%, of its topline from commission income from resale and rental of properties in 1H20121. The 95% y-o-y surge was achieved through a 228.6% increase in private resale transaction volume and a 57.1% pick-up in HDB resale activity.
APAC Realty also indicated that its market share of residential sales transactions improved to 41.1% in 1H2021. In addition, the private rental market volume also improved 17.9% y-o-y in 1H2021. “Looking ahead, we believe that the resale residential market would likely remain robust, in tandem with the primary residential segment,” writes Lock.
Meanwhile, DBS Group Research analyst Ling Lee Keng is also maintaining “buy” on APAC Realty, with a raised target price of $1.05 from 74 cents previously.
“This is on the back of the improvements in both the Covid-19 situation as more people are inoculated, and the economy. Though share price has gained about 90% YTD, it still lags peer’s Propnex performance of about 150% gain during the same period,” writes Ling in an Aug 16 note.
Ling projects the transaction value for Singapore’s overall property market to grow by a “strong” 48% in FY2021F and another 6% in FY2022F. “This is revised up from our previous assumption of 27% in FY2021F and 3% in FY2022F, after 24% growth in FY2020. The positive market sentiment on the back of a low interest rate environment, healthy supply of projects, expectations of a gradual economic recovery and healthy housing demand is outweighing the Covid-19 impact.”
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According to Ling, APAC Realty is trading at an “attractive” 10.9 times FY2021F price-to-earnings ratio (P/E), which is near its five-year average P/E, and lower than its closest peer, Propnex, at 17 times.
As at 2.07pm, shares in APAC Realty are trading 0.5 cents higher, or 0.56% up, at 89.5 cents.
Photo: Albert Chua/The Edge Singapore
