Selloff in APAC Realty is opportunity to accumulate, DBS says

Singapore two-dollar bills

Shares of APAC Realty have fallen around 35 percent from their March peak, and that offers an opportunity to accumulate, DBS said in a note last week.

It noted the stock’s valuation is attractive at 9.5 times forward price-to-earnings, below the around 10 times it listed at in September of last year.

“APAC is one of the purest proxies to ride on the uptrend in the Singapore property market,” DBS said. “Second half of 2018 earnings is
expected to be stronger with more projects slated for launch. ERA is also able to secure a high market share for the projects that it
has been appointed as marketing agent, as compared to other appointed agents.”

DBS added that APAC Realty has a “low risk” business model which can allow it to ride on property up-cycles, while protecting it in down-cycles, when developers may need to offer agents higher commissions for sales. It noted that the recent acquisition of an office headquarters will also provide recurring rental income.

DBS has projected that the private residential market will have a total transaction value of S$52.2 billion this year, up 15 percent on-year, and S$57.4 billion next year, up 10 percent. It estimated every additional S$1 billion in transaction value would add 2 percent to its earnings per share and target price estimate.

It noted ERA has a pipeline of 11,343 units across 21 new project launches until the third quarter of this year, more than the number of units secured for all of 2017.

It kept a Buy call on the share, but trimmed its target price to S$1.22 from S$1.32 to account for the debt financing to acquire the office building.

The stock ended Monday up 0.61 percent at S$0.82.