RHB Group Research analyst Vijay Natarajan has downgraded his recommendation on APAC Realty to “neutral” despite the property group’s strong set of numbers in the 1HFY2021 ended June.
See: After doubling revenue and earnings in 1H21, 'buy' APAC Realty on continued upswing: analysts
He has, however, upped his target price estimate to 88 cents from 70 cents previously.
“Considering the risk-reward profile, its FY2022 price-to-earnings (P/E) of 13 times is fair,” he writes in an Aug 18 report.
To this end, he has also raised his net profit estimate for the FY2021 to FY2022 by 28% and 18% considering the strong volume in the residential sector.
That said, Natarajan says he expects earnings to peak in FY2021. He also expects earnings to decline by 15% in FY2022 on lower inventory levels and the release of pent-up demand.
He adds that there is a higher risk of policy measures implemented to cool the market “if the current exuberance persists”.
“The recent property market euphoria and price hikes raise policy intervention risk, in our view, with higher possibility of demand-side measures in the near term – a key risk to APAC’s share price.”
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As at 9.45am, shares in APAC Realty are trading 1 cent lower or 1.07% down at 92.5 cents, with an FY2021 P/B of 2.22 times and dividend yield of 10.7%, according to RHB’s estimates.
Photo: APAC Realty
