DBS Group Research has kept its “hold” call on APAC Realty with an unchanged target price of 67 cents, following a slight earnings dip reported by the property agency for its 1HFY2022.
The company, which operates the ERA franchise, plans to pay an interim dividend of 3.5 cents per share for 1HFY2022, representing a payout ratio of 75%. Back in 1HFY2021, APAC Realty paid an additional special dividend of 3 cents per share as well.
DBS calls the 1HFY2022 numbers “healthy”, as the property market has shown its “resilience” amid global challenges thanks to strong demand from both local and foreign buyers.
While the volume of transactions for 1FHY2022 dipped, they were generally transacted at higher prices.
APAC Realty’s revenue from brokering resale and rental deals dropped for 1HFY2022 but was partially offset by better new home sales.
In the first six months of 2022, the private residential market in Singapore saw a 30% y-o-y drop in transaction volume, with the steepest drop from the higher-margin new homes segment, which was down 40% y-o-y. The HDB resale segment also saw a 6.1% y-o-y decline in the same period.
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DBS, in its Aug 9 note, points out that there’s a time lag of three to six months before revenue from transactions are booked. As such, DBS is expecting a slower 2HFY2022 for APAC Realty.
“Though demand remains strong, outweighing supply, especially for the new homes segment, this could be partly mitigated by the challenges of rising interest rates, higher inflation and rising land cost,” adds DBS.
CGS-CIMB Research analyst Lock Mun Yee is keeping her "add" call with an unchanged target price of 84 cents as APAC Realty's earnings per share (EPS) of 4.7 cents for the 1HFY2022 was deemed "broadly in line" at 65.6% of her full year forecast for 2022.
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In her report, Lock is keeping her EPS estimates unchanged for the FY2022 to FY2024.
"We believe [APAC Realty's] share price is likely supported by a projected FY2022 dividend yield of 7.8%," she writes, as she identifies the company's ability to gain further market share in both the primary and secondary residential segments and identifying new growth drivers as potential re-rating catalysts.
To her, the delayed recovery of the property market due to a weak macro outlook and continued loss of market share is a key downside risk.
RHB Group Research's Vijay Natarajan has taken a different stance than his peers at DBS and CGS-CIMB.
In his report, Natarajan has downgraded APAC Realty to "neutral" with an unchanged target price of 75 cents. The analyst's downgrade comes as he expects the company's net profits for the 2HFY2022 to drop by 50% on the back of lower transaction volumes.
"While we anticipate Singapore property prices to remain resilient, transaction volumes are expected to fall from limited new launch inventory and rising interest rates. Share price rebounded 15% over the past month and we expect it to be more range bound in the near-term from a lack of strong catalysts," he writes.
However, the analyst has upped his net profit estimates for the FY2022 to FY2023 by 1% to 2% by tweaking his volume assumptions.
APAC Realty closed at 69 cents on Aug 8, down 2.84% for the day.
