SINGAPORE (June 3): CGS-CIMB Research analyst Lock Mun Yee is reiterating an “add” call on real estate services provider APAC Realty with a target price of 53.8 cents, translating to an upside of 32.8% for the counter.
In a Tuesday report, Lock notes that new home sales year to date, inclusive of executive condominiums stand at 2,848 units or a year-on-year decrease of 22%. This accounts for 36% of the lower-end of the brokerages transaction volume estimates of 8,000 to 9,000 units for 2020
According to the Urban Redevelopment Authority (URA), sales of new private homes during the circuit breaker period from May 1 to May 24 totaled to 322 units, or “slightly more” than 270 units recorded in April.
“The best-selling projects were Parc Clematis, Parc Esta, The Florence Residences and Treasure at Tampines, making up close to 44% of total sales in that period,” shares Lock.
While Lock is opting to remain positive on APAC Realty, the effects of closed property showrooms during Phase 1 of the post-circuit breaker reopening are likely to be significant.
As such, Lock has taken to lowering her FY2020-22F earnings estimate by 12.2-14.9% on slower market volumes.
“[This is] assuming that APAC Realty retains its market share of 36% in the primary home sale market and 33.4% for the private resale market, unchanged from FY2019,” says Lock.
She also says APAC Realty’s registered base has grown to 7,215 agents as at June 1, making it the second largest after Propnex by agent headcount. This gives it a market share of 23%.
“This should translate to an expanded marketing network in the medium term,” adds Lock. “A key catalyst for APAC Realty’s share price outperformance would be the ability to garner more market share going forward.”
While market sentiment remains weak, APAC Realty has secured a healthy pipeline of marketing appointments with 25 new projects, or 7,466 units, as of February to be launched this year.
The way Lock sees it, APAC Realty’s regional expansion strategy could pay off. She recalls the group’s $1.5 million investment for a 38% stake in ERA Vietnam, which is profitable and had an estimated market share of 20% in Vietnam’s project marketing sector at the end of last year.
According to her, this will add to APAC Realty’s 6,500 agents across 114 member brokers in Indonesia and 420 agents across 22 member brokers in Thailand.
“This positions the group for robust medium-term growth as it leverages the faster-growing real estate markets in Southeast Asia,” says Lock.
As at 11.21am, shares in APAC Realty are trading 0.5 cent lower, or 1.24% down, at 40 cents. This translates to a price-to-earnings (P/E) ratio of 10.6 times and a dividend yield of 4.8% for FY2020F according to CGS-CIMB valuations.