SINGAPORE (June 10): Top executives in PropNex Realty recently acquired a total of 709,400 shares at 48 cents each. Executive chairman and CEO Ismail Gafoore purchased a total of 609,400 shares on May 28 and June 4 and executive director Alan Lim Tow Huat bought 100,000 shares on June 4.
Their purchases come after shareholders approved a share buyback mandate at the most recent annual general meeting on April 10. PropNex can now buy up to 37 million shares from the market, but it has yet to do so.
Ismail has made several share transactions since March. On March 26, he acquired 300,000 shares at 59 cents apiece and on March 27, he bought another 200,000 at 58 cents each. He also transferred 24,076,650 ordinary shares held by him and registered in the Register of Members of the Company to his nominee account maintained with UOB Kay Hian on March 4.
PropNex is one of only two listed real estate agencies in Singapore. According to reports, it has consistently been among the top two companies in terms of market share of property agents in its stable. The other listed real estate agency, APAC Realty (operating under the ERA brand), has almost more than half of the property agents in Singapore.
As at 2018, PropNex and APAC handled about 85% of all property transactions. Broking houses are positive on PropNex’s high double-digit returns over the years. It recorded a return on equity of 31% in 2018, with little to no leverage. The brokerage business is asset-light, with most of the salesforce being paid on a variable basis, allowing both companies to easily maintain or grow their high ROEs.
PropNex has also been able grow its revenue by 30% in 2018, despite an 8% decline in private residential transactions in Singapore as a result of the challenging property market.
On June 3, Phillip Securities analyst Tara Wong initiated coverage on both APAC Realty and PropNex and made “buy” calls. Her price targets for APAC Realty and PropNex are 65 and 63 cents respectively. She describes their business model as “highly scalable” and “resilient”.
PropNex started trading on July 2, 2018, less than a year after the September 2017 listing of APAC Realty. From the IPO price of 65 cents, it hit as high as 79 cents on its trading debut. The gains were quickly wiped out when the government announced on July 5, 2018 yet another round of property cooling measures, which took the market by surprise. PropNex shares dropped to as low as 52 cents the next day and have not risen much since.
For 1QFY2019 ended March 31, PropNex reported revenue of $74.2 million, down 27.8% y-o-y. It attributes the drop to lower commission income from project marketing services. Consequently, earnings declined 66.6% y-o-y to $2.3 million.
In a press release, PropNex said the Singapore real estate market is still feeling the effects of the interest rate increments by local banks and property cooling measures implemented last July, but buyers and investors were beginning to regain confidence in entering the market towards the end of the quarter.
For the rest of the year, PropNex is betting on the anticipated line-up of 66 projects, with a total of more than 20,000 units to be launched this year. So far, it has been the appointed marketing agent for 46 projects.
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