SINGAPORE (Mar 1): RHB Research is maintaining APAC Realty at “buy” given demand for Singapore’s residential property is expected to remain resilient despite a strong pipeline of new launches in 2019.
Furthermore, the recent move by APAC Realty to strengthen its overseas presence should help in earnings diversification and bring benefits in the long term.
And while the stock has rebounded from lows since the start of the year, valuations are still attractive at 9x FY19F earnings.
“Keep “buy” and 72 cents target price, 26% upside plus 7% FY19F yield,” says analyst Vijay Natarajan in a Friday report.
For FY18, APAC Realty declared total DPS of 4.5 cents vs RHB’s estimate of 4 cents. This translates into 7% yield and payout ratio of 66%. Management intends to maintain its dividend policy of paying out at least 50% of net profits, with room for upside.
Despite slower takeup rates in recent launches, Natarajan expects new launch volumes in 2019 to stay similar to that of 2018.
This is mainly due to a strong pipeline of 50 residential projects with more than 20,000 units that are expected to be launched in 2019, which is more than twice that of last year.
APAC Realty has also secured agent roles for 46 projects which works out to be 20,000 units.
This year, Natarajan expects volumes in the private resale market to stabilise as more resale units become available in the market, with the en bloc market coming to a standstill.
The HDB resale & rental market segment should also see a pickup in activity as 30,000 units are nearing their minimum occupation period of five years, after which they become eligible for sale.
Meanwhile, APAC Realty’s market share position remains healthy. Its ERA brand had an overall market share of 36.4% of total residential transaction value compared to 37.9% in FY17, based on internal estimates.
For new launches, APAC Realty still commands a healthy market share of 40.7% in transaction value compared to 39.4% in FY17, while the private resale market share stood at 37.2% compared to 38.8% in FY17.
ERA’s current agent count has also increased to 6,600, thanks to acquisitions.
“Keep ‘buy’ and 72 cents target price, 26% upside plus 7% FY19F yield,” says Natarajan.
As at Mar 1, shares in APAC Realty are trading 0.5 cent lower at 56 cents.
