DBS Group Research continues to rate APAC Realty “hold” with a target price of 40 cents, slightly lower than 41 cents previously.
This is despite the group recording a 52% y-o-y jump in 1H20 earnings to $7.8 million, with revenue increasing by 6% to $172.8 million, as it generated higher fees from helping developers launch new projects.
The company plans to pay an interim dividend of 0.75 cents per share – same as this time last year.
See: APAC Realty reports 52% jump in earnings for 1HFY20
In an August 14 report, analyst Ling Lee Keng says, “However, the sky is not clear as 2H20, especially 3Q20, is expected to bear the bulk of the negative impact from Covid-19. This is mainly due to the time required for completion of real estate transactions and time lag in revenue recognition.”
In terms of market segment, the private primary market was not as badly hit as the secondary market during the lockdown period. About 20% of primary sales were conducted via virtual viewing.
Hence, Ling has raised sales assumption for the primary market segment, projecting a 21.6% y-o-y drop (compared to -33.5% previously) in transaction value in FY20.
Overall, the private rental housing market, leasing demand, and consequently rents, may remain under pressure on the back of the weak economy and fewer expatriates coming to Singapore as border restrictions remain in place.
Furthermore, some expatriates may opt for cheaper housing options as some may be facing pay cuts or given smaller housing packages in the current macroeconomic uncertainties.
“We are less optimistic in the take up rate of new launches as well as transaction activities in the resale market,” says Ling.
Nonetheless, there is still a healthy supply of launches, albeit lower than last year. As at August 13, 2020, ERA has launched 15 projects YTD, compared to 43 projects launched in the year 2019. There are 27 more projects slated to be launched during the rest of this year and 1H21.
As at 3.00pm, shares in APAC Realty are trade at 38 cents or 11.8 times FY20 earnings with a dividend yield of 4.3%.
