SINGAPORE (June 18): DBS Vickers Securities is reiterating its “buy” call on APAC Realty with a lower target price of $1.22 compared to $1.32 previously, after accounting for the group’s partial debt financing for its new office building based on DCF valuation.
The research house retains its P/E peg of 15 times on the group’s FY18F earnings.
In a report last Thursday, lead analyst Ling Lee Keng says she sees the counter’s recent share price weakness as an opportunity to accumulate, with valuations currently attractive at 9.5 times forward P/E or -1.5 SD, which is even lower than the 10 times forward P/E when APAC Realty was listed on Sept 17.
At the close of last Wednesday, she notes that the group’s share price has shed about 35% to 82.5 cents from its March 2018 high.
“APAC is one of the purest proxies to ride on the uptrend in the Singapore property market. 2H18 earnings is expected to be stronger with more projects slated for launch. ERA is also able to secure a high market share for the projects that it has been appointed as marketing agent, as compared to other appointed agents. Its low risk fee-based business model enables it to ride on the property up-cycle and protects it in a down cycle,” comments the analyst.
Highlighting APAC Realty’s recent acquisition of an office headquarters, which Ling sees as a recurring source of rental income, she also believes ERA’s strong Singapore residential market share of about 38% will allow the agency to reach out to a diverse base of potential property buyers amid an residential uptrend.
In terms of industry transaction value for the private residential market, DBS continues to expect a 15% increase to $52.2 billion for FY18F, and 10% to $57.4 billion for FY19F, with every additional $1 billion in transaction value to add 2% to EPS and TP estimates.
“ERA has a pipeline of 11,343 units across 21 new project launches till 3Q18, which is significantly higher than the units secured in the whole of 2017. Successful sell-through rates for the various projects will set the stage for another record year in FY18F,” says Ling.
Shares in APAC Realty last traded 1 cent lower at 80 cents before the midday break.
