PhillipCapital’s head of research Paul Chew has downgraded APAC Realty to “neutral” from “accumulate” on “weaker-than-expected” 1H20 results.

The lower recommendation comes despite the group, which runs the property agency ERA, reporting higher profit after tax and minority interests (PATMI) of $7.7 million, which represents a 52% growth from earnings in 1H19.

See also: APAC Realty reports 52% jump in earnings for 1HFY20, and Weak outlook ahead keeps APAC Realty at 'hold': DBS

Despite the improvement in earnings, APAC Realty maintained its interim dividend of 0.75 cents a share from the same period a year ago.

Though there is a pick-up in property transactions in July and August, Chew remains concerned on whether the weak economy will “hurt buying sentiment” in 4Q20.

On this, Chew has lowered his target price to 36.5 cents from 55 cents previously. He has also cut his earnings estimates for FY20e by 17% to “account for slower 2H20”.

In his outlook statement, Chew foresees that the second half of FY20 will “bear the brunt of the lockdown especially new home sales and resale”.

“There was no viewing of units from April 7 to June 19. Another $0.7 million from [the] Jobs Support Scheme (JSS) grant can be expected in 2H20,” he says.

“A positive has been the company efforts to expand more aggressively the ERA model into SE Asia, such as Malaysia, Indonesia and Vietnam. This will lay the foundation for future growth outside Singapore,” he adds.

CGS-CIMB Research analyst Lock Mun Yee has, on the other hand, maintained her “add” call on the counter with an unchanged target price of 53.8 cents due to the group’s “strong” 1H20 performance.

Lock has also maintained her earnings per share (EPS) and distribution per share (DPS) estimates for FY20e as APAC Realty’s 1H20 EPS of 2.18 cents is “in line” at 58% of her FY20F forecast.

Unlike Chew, Lock expects primary home transactions to “remain resilient” in 2H20, although she also estimates 3Q20 to be more “muted with a lag in profit recognition” for the group.

“With slower half-on-half (h-o-h) volume sales in both the primary and resale residential segments in 1H20 and the time lag in profit recognition from these sales, we believe earnings growth momentum could slow in 3Q before picking up towards year end,” she says.

APAC has been appointed marketing agent for 42 projects in 2020, of which 15 projects have already been launched.

“A re-rating catalyst for APAC includes the ability to regain market share in both the primary and secondary residential segments,” Lock adds.

As at 4.28pm, shares in APAC Realty were trading 0.5 cents lower, or 1.3% down, at 37 cents.