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Analysts like APAC Realty as it builds up overseas operations

Samantha Chiew
Samantha Chiew • 4 min read
Analysts like APAC Realty as it builds up overseas operations
SINGAPORE (Feb 25): Analysts are rather positive on real estate brokerage APAC Realty, following the announcement of its 4Q19 and FY19 results.
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SINGAPORE (Feb 25): Analysts are rather positive on real estate brokerage APAC Realty, following the announcement of its 4Q19 and FY19 results.

Yesterday, APAC Realty announced its 4Q19 earnings, which came in at $5.5 million, 33.3% higher than $4.1 million a year ago. Revenue for the same period was 31.7% higher y-o-y at $107.8 million, while cost and expenses increased by 30.9% y-o-y to $100.9 million.

However, on a full-year basis, FY19 earnings was 42.2% lower at $14.0 million compared to the previous year. For this period, revenue dipped 13.1% y-o-y to $365.1 million, while cost and expenses also saw a drop of 10.7% y-o-y to $352.3 million.

For FY19 ended Dec 31, the group has proposed a second and final dividend of 1.25 cents per share, lower than the 2.5 cents declared in the previous year. This, along with the interim dividend of 0.75 cents, the aggregate dividend of 2.0 cents represents a dividend yield of 4.2% based on the closing price of 48 cents on Feb 21.

Commenting on the group’s performance, Jack Chua, executive chairman and CEO of APAC Realty says, “During the year, we maintained a healthy 38% share of the residential property market despite the cooling measures.”

“Although the property cooling measures implemented in July 2018 continued to depress sentiment and weaken home buyer interest, the market showed signs of improvements in FY2019, in particular the primary market and HDB resale market,” he adds.

Overall, the group’s results were broadly in line with CGS-CIMB Research’s expectations. The research house has also kept its “add” call on the counter, but with a lower target price of 61 cents from 66 cents previously.

In a Monday report, analyst Lock Mun Yee says, “The better 4Q performance was due to higher brokerage income contribution from new home sales, which jumped 79% y-o-y to $42.1 million. This was in tandem with a market pickup in primary volume transactions due to a low base in 4Q18, post-property cooling measures.”

Going into FY20, the group has indicated it has a network of 7,048 agents as at Jan 1 and had secured a healthy pipeline of marketing appointments, with 25 projects (7,466 units) to be launched this year.

In terms of its regional expansion strategy, the group has 6,500 agents across 114 member brokers in Indonesia, while ERA Thailand posted positive performance in FY19. It has 420 agents across 22 member brokers in Thailand and had closed approximately 1,000 units of primary and secondary transactions in FY19.

“We anticipate these overseas operations to continue to gather momentum from FY20 onwards,” adds Lock.

RHB Group Research shares the same sentiment as it is maintaining its “buy” recommendation on APAC Realty with a target price of 60 cents.

In a Tuesday report, analyst Vijay Natarajan believes that the group is “holding up” despite lower overall consumer sentiment due to the coronavirus (Covid-19) outbreak. The recent new launches of Parc Canberra and The M Condo saw strong responses, with more than 300 units sold at both projects.

“Sales at new launches and the secondary market have so far been holding up despite fears of pullback due to the Covid-19 outbreak. Our base case assumption is that impact, if any, from Covid-19 would be short term in nature. We continue to expect recovery in both primary and secondary volumes,” says Natarajan.

Management noted that many developers are still seen proceeding with launch plans as scheduled. And for 2020, it has secured the marketing role for 25 new projects and volumes in the secondary market have also not seen any sharp slowdown so far.

“Overall, we maintain our expectations of slight growth (0-5%) in transaction volumes for both primary and resale markets in 2020. The HDB resale and rental market is also expected to fare slightly better,” adds Natarajan.

The analyst also expects the group’s overseas markets and ERA APAC Centre to turn profitable in 2020.

On the other hand, DBS Group Research is less bullish on APAC Realty as it maintains its “hold” recommendation on the stock, but with a higher target price of 52 cents from 46 cents previously, as DBS is still expecting modest growth in terms of property transaction values.

In a Tuesday report, analyst Ling Lee Keng says, “We are less optimistic in the take up rate of new launches as well as transaction activities in the resale market.”

As at 11.30am, shares in APAC Realty are trading at 47 cents or 1.1 times FY20 book with a dividend yield of 4.7%, according to DBS’ estimates.

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