Maybank Securities analyst Eric Ong has retained his “buy” call on PropNex OYY with a higher target price of $1.20 from $1.10 previously.
This is amid Singapore’s residential property market resilience on the back of strong underlying demand for housing, despite two rounds of cooling measures in the past seven months.
In his June 1 report, Ong notes that PropNex may register softer 1HFY2023 earnings y-o-y due to lack of project launches in 4Q2022 and 1Q2023. Despite this, he expects the company’s performance to rebound in 2HFY2023.
PropNex may see its transaction volumes improve with more supply. Ong points out that the supply of private housing under the Government Land Sales programme has increased from 3,500 units on the Confirmed List in the 2H2022 to 4,100 units in 1H2023.
Meanwhile, on the public housing front, the Housing and Development Board (HDB) will also launch up to 23,000 flats this year aside from about 40,000 new flats in total from 2024-2025, subject to prevailing demand.
Given that locals and permanent residents still dominate home sales, Ong expects most new launches to proceed as scheduled. However, developers will need to price their units more sensitively given the high interest rates and uncertain macro environment, he says.
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“In fact, Far East Organization and its joint venture partner Sino Group sold 520 units at The Reserve Residences on its first weekend on May 27 and 28. This sales figure translates to 82% of units released (635) and 71% of total units (732) at an average price of $2,450 per sq ft,” adds Ong.
PropNext’s rental, HDB resale, landed, commercial and industrial segments are unlikely to be affected much by the latest cooling measures, Ong says. Together, these segments account for close to 40% of its FY2022 revenue.
While there may be some slowdown in the sales of high end and luxury homes in the core central region, Ong believes that foreign investors may shift their focus to commercial and shophouse properties.
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Maybank rolls forward PropNex’s valuation to FY2024 and pegs it at a higher PE of 15x from 14x previously, given its growing market share and better trading liquidity post 1-1 bonus issue in May 2023.
Ong also notes that during May 19 to 22, PropNex executive director Kelvin Fong acquired 784,200 shares in the open market at an average price of $1.02 per share, lifting his direct and deemed interest in PropNex to 8.85% from 8.75% previously.
As at 10.37am, shares in PropNex are trading 1 cent lower or 0.98% down at $1.01.
