SINGAPORE (June 25): PropNex Realty has launched its initial public offering to raise $38 million, becoming the second real estate brokerage to list on the Singapore Exchange after APAC Realty.

PropNex's prelim IPO prospectus attracts unwanted attention over discrepancies

The company is offering 42.5 million shares at 65 cents each, with 40.375 million shares placed to institutional and other investors in Singapore and internationally. The remaining 2.125 million shares will be offered to the public.

Separately, cornerstone investors have subscribed for 50 million cornerstone shares. They include Nikko Asset Management Asia subscribing for 6.1 million shares, NTUC Income Insurance Co-Operative for 9 million shares, FIL Investment Management (Hong Kong) for 12.4 million shares, Value Partners Hong Kong for 7.5 million shares and Affin Hwang Asset Management for 7.5 million shares. PropNex’s market capitalisation will be $240.5 million upon listing.

PropNex intends to use $12 million of the proceeds to for a range of purposes from local and regional expansions, $8 million for enhancement of the real estate brokerage business, $7 million for expanding business services, $6 million for enhancing technological capabilities and $5 million for working capital purposes.

The company does not have a fixed dividend policy, but intends to distribute at least 50% of earnings for the financial period from the listing date to Dec 31 2018 and FY2019 ending Dec 31.

“Our IPO is yet another exciting milestone for us as it provides a platform for PropNex to not only further solidify our position in Singapore, but also access to the capital market to expand our business into new consultancy services as well as promising geographical markets, such as Vietnam and other Southeast Asian countries,” says Ismail Gafoor, co-founder, executive chairman and chief executive officer, PropNex.

In a separate press statement, Propnex also addressed the alleged discrepancies in its prospectus raised by observers. Regarding the transaction PropNex and Dennis Wee Group (DWG), the company claims that the memorandum of understanding signed only set out the understanding, intention and agreement-in-principle for DWG to facilitate the transfer of agents.

“Neither the company nor [PropNex’s] Ismail had indicated that the transfer of DWR salespersons would be free,” says PropNex who priced the deal at $5 million in the registered portfolio.

PropNex also dismissed claims of discrepancies between the FY16 unaudited revenue and profit given by PropNex to the press last year and the audited figures disclosed in the IPO prospectus. Instead, PropNex says investors should refer to the audited financial statements for FY2015, FY2016 and FY2017 by KPMG as the correct figures.

“We wish to categorically address these issues so that we can move forward, and continue to add value to our salespersons and investors who have placed their trust in us. Over the last 17 years, we have consistently run the company in accordance with our core values and have been successful in building it to where we are today,” says PropNex.

However, there was no mention of the potential risk of a concentration of agents under a single team leader. According to some observers, PropNex executive director Kevin Fong leads about 3,000 agents under Team Powerful Negotiators. This accounted for close to 40% of PropNex’s entire salesforce of 7,248 salespersons and should have been flagged as a risk factor.

The offer will close at 12 noon on June 28. Trading of PropNex’s shares will start at 9am on July 2.