Analysts from CGS-CIMB Research and PhillipCapital are pleased with PropNex after its 1QFY2021 ended March results saw it beating expectations.

CGS-CIMB’s Lock Mun Yee kept her ‘add’ rating for the counter with a higher target price of $1.19 from 88 cents previously. Similarly, PhillipCapital’s Paul Chew kept his ‘buy’ call with a higher target price of $1.36 from $1 previously.

Lock notes that all of PropNex's segments benefitted from the increasingly robust property market, resulting in its PATMI almost doubling to $14.8 million for the 1QFY2021.

She believes that PropNex was able to achieve y-o-y improvement in market share for project marketing services, which, in combination with the buoyant market, resulted in commissions rising 63% y-o-y to $98.3 million for the period.

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Given that PropNex has been appointed as the project marketing agency for 26 projects as at April, the bulk of which are in the central region and city fringe locations, Lock is optimistic that good take-up of these higher-priced projects will continue driving PropNex’s project marketing segment. 

“Moreover, PropNex does not expect any material impact on its business from the recent stepped up Covid-19 safety measures effective from 8 May, thanks to its ability to operate effectively via virtual and digital platforms,” she adds.

Lock expects continued momentum in private resale transactions to continue underpinning PropNex’s earnings outlook for the year. “[Its] strategy of attracting potential buyers through consumer events and recent acquisition of a 70% stake in Ovvy, a technology platform that connects service providers to consumers, should enable it to continue to gain market share traction, in our view,” she adds.

To that end, Lock has raised her FY2021 - FY2023 earnings per share (EPS) estimates by 15.9% - 21.9% on increased private resale and primary market transaction value assumptions, due to a higher mix of centrally-located products. She also believes PropNex will maintain a high dividend payout ratio for FY2021, noting that in FY2020 it had a payout ratio of 71%.

SEE:PropNex earnings for 1Q21 nearly doubles to $15 mil on better transaction volume

Meanwhile, PhillipCapital’s Chew raised his FY2021 PATMI forecast by 34% to $41.3 million following revenue uplift by 23%, which underpins his higher target price of $1.36.

Chew highlights that the momentum in property transactions is building up to a record year since total debt servicing ratio measures implemented in 2013, with new home sales and private resales in 1Q2021 jumping 63% and 117% y-o-y respectively.

He cautions that any double-digit rise in property prices will be a concern for authorities and could result in cooling measures kicking in 2Q2021 if prices rise 4% or more q-o-q.

In the meantime, he notes that despite the recent tightening of Covid-19 measures, transactions “have been healthy”, thanks to a partial transition in training and viewing to virtual mode. 

As at 3.25pm, shares in PropNex are up 5 cents or 4.39% higher at $1.19.