SINGAPORE (May 19): CGS-CIMB analyst Lock Mun Yee is keeping her “add” call on Propnex but with a lowered target price of 62.5 cents from 69.8 cents previously.
This came on the back of the company releasing its 1Q20 results, which saw earnings surge 278.8% to $7.6 million from just $2.0 million in 1Q19.
Revenue for the first quarter ended March was 82.7% higher y-o-y at $135.6 million, mainly due to the increase in commission income from agency services of approximately $15.9 million and increased in project marketing services of approximately $45.8 million. The increase was mainly due to the higher number of transactions completed in 1Q20 following the recovery of the private residential market from the property cooling measures of July 2018.
This brings gross profit to $15.1 million, 105.5% higher than the previous year.
The better operating performance was achieved on the back of higher transaction volumes in the new and resale markets in 1Q. According to URA, sales of new private residential units in 1Q20 were 16.9% higher y-o-y, while the resale market saw a 12% rise in volumes. The HDB resale also reported a 22% growth in volume sales.
“That said, with the extension of the circuit until June 1, we think the impact of weaker sales is likely to be felt in 2H20,” says Lock.
Propnex expects private residential sales volume to contract by some 20% y-o-y in 2020, in line with the analyst’s revised forecast.
In terms of impact of the circuit breaker on the property market, Propnex shared that it had continued with its online webinar trainings and consumer events, and managed to garner sales and market share during this period. It had secured marketing roles for about 89 projects as at end-1Q20.
Overall, Lock is confident about the company’s strong balance sheet, with a gross cash balance of $89.8 million, translating to 24.2 cents per share, at end-1Q20. Hence, she believes that Propnex can potentially maintain an unchanged DPS in FY20 of 3.5 cents. This translates to an attractive yield of 7%.
As at 11.45am, shares in Propnex are trading at 50 cents or 2.5 times FY20 book.
