SINGAPORE (June 11): DBS analyst Ling Lee Keng has maintained her “hold” call on APAC Realty with a target price of 41 cents from 52 cents previously.
The new target price represents a 3% downside from the real estate agency’s share price, and is based on its average forward price-to-earnings ratio (PE ratio) of 19x on its FY21F earnings.
In a Thursday report, Ling says she foresees an “adverse financial impact” in 3Q20 owing to weak sales in 2Q20 due to the time lag in revenue recognition.
On Wednesday, APAC Realty reported weak property sales on the back of suspended real estate activity due to the circuit breaker measures from April to June. This is despite its rise in its share of the residential property market from 37.9% to 39.8% in 1Q20 ended March
On this, Ling has lowered her sales estimates across all segments, from her pre-Covid-19 projections.
She has cut the agency’s FY20F-FY21F earnings by 69% and 53%, and is projecting a 34% y-o-y drop in transaction value for the private primary and secondary segments in FY20F, followed by a slight rebound of 3% in FY21F.
“The HDB resale market is also expected to be weak, -5% y-o-y in FY20F and +3% in FY21F,” she says.
To date, Ling sees ample supply in the market, with some 12,300 new home units to be launched in FY20 to 1H21, and she is “less optimistic” in the take up rate of new launches.
However, a strong pick up in private property transaction activities, and easing of property cooling measures could help the agency boost its earnings.
As at 3.40pm, APAC Realty shares are changing hands 2 cents lower, or 4.8% down, at 40 cents.
