Singapore Property Analyst

Anni Kum

Equity Bottom-Up

The real estate brokerage industry in Singapore is highly competitive. On average, the ratio of residential transaction volume to real estate agents was just 1.8 per agent in 2017.   According to the Council of Estate Agencies, as at 11 August 2019, <a href="https://www.smartkarma.com/entities/propnex-ltd" target="_blank" data-smartkarma-citation="entities:27209:1" rel="noopener">Propnex Ltd (PROP SP)</a> is the largest listed real estate agency in Singapore with 8,049 salespersons, a growth of 649 salespersons or 8.8% since the beginning of 2019. Whilst its closest competitor, <a href="https://www.smartkarma.com/entities/apac-realty-ltd" target="_blank" data-smartkarma-citation="entities:25900:1" rel="noopener">APAC Realty Ltd (APAC SP)</a>, still commands a stronger gross profit margin than Propnex, Propnex is rapidly catching up with APAC Realty, as shown by its 2Q19 financial results announced last evening.In this insight, we provide a summary and review of Propnex’s financial results and a comparison with its competitor APAC Realty’s performance. We discovered that operationally, Propnex has performed better than APAC Realty in 2Q19 and it is likely that APAC Realty has also lost market share to Propnex in the project marketing segment as seen from the narrowing revenue gap between the two companies. Propnex is paying out 81.1% of its 1H19 profit as interim dividend. While this payout ratio is much higher compared to FY18, it is still sustainable as the total cash dividend payment can be supported by the operating cashflow without tapping onto its cash hoard. Based on Propnex’s closing price of S$0.495 per share yesterday, the interim dividend translates into an annualised yield of 5.1% per annum. In contrast, APAC Realty announced 62.5% YoY decline in its interim dividend, from 2.0 cents per share in 1H18 to 0.75 cents per share in 1H19. This works out to an annualised yield of 3.1% per annum based on APAC Realty’s closing price of S$0.49 per share. Overall, with zero debt and a large cash hoard, Propnex has a stronger and more defensive balance sheet than APAC Realty that can help the company to weather a prolonged downturn in the property market and also allow it to make opportunistic acquisitions.Compared to its debut, therefore, Propnex currently has a better value proposition.

The real estate brokerage industry in Singapore is highly competitive. On average, the ratio of residential transaction volume to real estate agents was just 1.8 per agent in 2017.   According to the Council of Estate Agencies, as at 11 August 2019, Propnex Ltd (PROP SP) is the largest listed real estate agency in Singapore with 8,049 salespersons, a growth of 649 salespersons or 8.8% since the beginning of 2019. Whilst its closest competitor, APAC Realty Ltd (APAC SP), still commands a stronger gross profit margin than Propnex, Propnex is rapidly catching up with APAC Realty, as shown by its 2Q19 financial results announced last evening.In this insight, we provide a summary and review of Propnex’s financial results and a comparison with its competitor APAC Realty’s performance. We discovered that operationally, Propnex has performed better than APAC Realty in 2Q19 and it is likely that APAC Realty has also lost market share to Propnex in the project marketing segment as seen from the narrowing revenue gap between the two companies. Propnex is paying out 81.1% of its 1H19 profit as interim dividend. While this payout ratio is much higher compared to FY18, it is still sustainable as the total cash dividend payment can be supported by the operating cashflow without tapping onto its cash hoard. Based on Propnex’s closing price of S$0.495 per share yesterday, the interim dividend translates into an annualised yield of 5.1% per annum. In contrast, APAC Realty announced 62.5% YoY decline in its interim dividend, from 2.0 cents per share in 1H18 to 0.75 cents per share in 1H19. This works out to an annualised yield of 3.1% per annum based on APAC Realty’s closing price of S$0.49 per share. Overall, with zero debt and a large cash hoard, Propnex has a stronger and more defensive balance sheet than APAC Realty that can help the company to weather a prolonged downturn in the property market and also allow it to make opportunistic acquisitions.Compared to its debut, therefore, Propnex currently has a better value proposition. 

Propnex Ltd: One-Up on Real Estate Brokerage