+ Robust share of new launches. Commission revenue from new launches (or project marketing) rose almost 2.5x to S$55.4mn. Apart from the overall improvement in sales, PropNex market share of new launches rose to 48% in 2019 (FY18: 42.4%, 3Q19: 46.1%). In 2019, PropNex was involved in 47 projects (FY18: 30).
+ Private resale market stabilised. Even the resale market has started to recover for PropNex. There was a 15% YoY increase in revenues. Revenues on a QoQ basis was flat. This segment saw PropNex enjoy the largest rise in market share from 34.2% in 2018 to 45% in 2019.
– Dividend below our forecast. DPS was marginally below our forecast of 3.7 cents. There is no formal policy but the company looks forward to paying at least 50% of earning. The payout this year is 65%. The business is highly cash generative and the company aims to pay consistent and attractive dividends. PropNex generated free cash flow of S$27mn in FY19 (FY18: S$21mn) against dividends payable of S$14mn.
We expect all three core business segments to enjoy growth in FY20e:
The rise in market share for PropNex was due to multiple initiatives, including intense training, improving the mindset of agents, deeper analysis of projects and better script and sales materials to agents to understand the projects and opportunities available from new launches or new pricing from developers.
Maintain BUY with a higher target price of S$0.70 (previously S$0.59)
Our target price is raised on the back of the 33% increase in our FY20e earnings forecast.