SINGAPORE (May 29): RHB Research is reiterating its “buy” call on APAC Realty while lowering its target price on the stock to 67 cents from 72 cents previously after cutting FY19-21F earnings to account for reduced private resale volume assumptions.

This comes after the group posted a 71% drop in 1Q earnings to $1.7 million, which is well under the research house’s and consensus estimates due to lower transaction volumes resulting from the implementation of property cooling measures.  

In a May 14 report, analyst Vijay Natarajan says he nonetheless remains positive on APAC Realty due to its strong new launch pipeline for this year and the next, with the group’s ERA Realty Network unit securing 30% project marketing roles for 2019 compared to a year ago.

“While take-up rates have slowed down in recent launches, new sales volumes are expected to remain similar to 2018 (~9,000 units) on the higher number of units available for sale and balance units from past launches,” notes Natarajan.

He also believes the HDB resale and rental market segment should see a pick-up in activity this year as about 30,000 units near their minimum occupation period, after which they become eligible for sale.

Although Natarajan has lowered his FY19-21F earnings estimates by 13%, 17% and 7% respectively on expectations of lower private resale volumes, he believes the group’s share price is likely to be supported by a >6% yield.

The analyst also likes APAC Realty for its near-term focus on increasing its agent count and deepening its overseas presence.

“ERA’s agent count has increased 12% y-o-y to 6,817 on management’s efforts to increase headcount via organic and inorganic means. APAC will also continue its efforts in increasing agent productivity through rigorous training programmes, technology tools, and targeting the right market segments. Additionally, the firm will focus on growing its overseas income contributions from growth opportunities in Indonesia and Thailand,” he notes.

As at 11:35am, shares in the group are trading flat at 52 cents or 1.2 times FY19F book value.