PropNex Ltd – Challenging but bottomed March 4, 2024 157

PSR Recommendation: ACCUMULATE Status: Maintained
Last Close Price: 0.92 Target Price: 0.970
  • 2023 results were below expectations. Revenue and PATMI were 83%/76% of our estimates. 2H23 adjusted PATMI declined 26% YoY to S$26.2mn, dragged down by weakness in new launch transactions. The dividend for FY23 dropped 11% to 6 cents or 6.9% yield.
  • Transaction volumes in 2023 disappointed. Consumer sentiment was weak and hesitant with April’s rising interest rates and cooling measures. Despite new launches rising by 66% in 2023 to 7,551 units, weakness persisted.
  • We lower our FY24e earnings by 16% to S$56mn. Our DCF target price was lowered to S$0.97 (prev. S$1.16) and ACCUMULATE recommendation maintained. We expect a recovery in transactions in FY24e. Driving transactions are recovering sentiment post-cooling measures, a higher number of new launches, a surge in residential completions, resilient HDB prices for upgraders, and lower mortgage interest. PropNex remains the largest real estate agency in Singapore, with 62.5% market share in private residential and HDB resale transactions. The company pays an attractive yield of 6.9% (or S$44mn) backed by S$148mn net cash.

 

 

The Positive

+ Market share gains and rising cash pile. PropNex shared that in 2023, its market share in new launches crept up 0.5% to 47.9%. Meanwhile, the share in resale rose a larger 6.8% points to 65.8%. HDB resale declined by 0.4% to 64.7%. It remains the largest real estate agency in Singapore, with 12,233 agents (or 66%). Cash continues to pile up in 2023 with a free cash flow of S$55mn (2022: S$49mn). The dividend payout ratio continues to rise to a record 93% in FY23.

 

The Negative

– Weakness in new launch revenue. Revenue in new launches declined by 36% YoY to S$128mn. The fall in sentiment post-cooling measure and the larger number of units available for resale affected demand. Gross margins contracted as new launches generate higher margins with the additional 0.5% commission paid to the agency.  

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About the author

Profile photo of Paul Chew

Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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