PropNex - Near-Term Headwinds
- We think that raising the floor interest rate for TDSR computation could dial down affordability by 5-6%, thus impacting marginal buyers. That said, the wait-out period for private property owners before they can purchase HDB resale units may push demand for rental apartments in the near term. We believe the slower market activity could likely impact property brokers’ commission income in the near-to medium-term. (Refer to the MAS-MND-HDB joint press release on 30 Sep 2022.)
- We tweak down our private resale market volume transaction assumptions for PropNex (SGX:OYY) in FY22F/FY23F to -25%/0% y-o-y from -28%/+2% y-o-y as well as project HDB resale transactions to shrink by 10% y-o-y in FY23F as we think market activity could cool in the near-term.
- Accordingly, our FY22-24F EPS forecasts for PropNex are lowered by 2.5-5.1%. With a strong agent force of close to 12k (as at Aug 2022), we believe PropNex should be able to weather the slower market well.
- PropNex established a series of new opportunities in 1H22 to expand its business activity base. In addition to its strategic expansion into the Good Class Bungalow (GCB) segment to penetrate the ultra-high net worth buyers, PropNex expanded its footprint to Australia in 2Q22 with the establishment of an office in Melbourne. The team has secured a number of collaborations with builders and developers to market locations in both Melbourne CBD and in growth suburbs. This expansion in its geographic footprint would also enable PropNex to tap into a new income source.
- Following our lowered earnings, we reduce our target price for PropNex to S$1.89 based on a blend of net cash-adjusted P/E and DCF valuation.
- PropNex offers investors 7.1% FY22F dividend yield, with 25% of its market cap backed by cash (S$0.36 per share). See PropNex's dividend history.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2022-10-03 2022-10-03
Read also CGS-CIMB's most recent report:
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