APAC Realty kept at Buy by RHB despite property cooling measures likely dampening sales

Singapore five-dollar note Photo by Leslie Shaffer

RHB is keeping APAC Realty at Buy despite expectations that the Singapore government’s new cooling measures will dampen property sales and despite the listing of rival PropNex.

APAC Realty shares have tumbled as much as 50 percent since its March peak, RHB noted.

“We believe this is due mainly to two key factors – the listing of its Singapore peer Propnex in July that resulted in investors taking profit and switching out of APAC into Propnex, and the unexpected implementation of property cooling measures that dampened market sentiment,” it said in a note last week.

In early July, Singapore’s government announced a fresh round of cooling measures for the property market, targeting the additional buyer’s stamp duty (ABSD) and loan-to-value limits. The surprise measures set off a selloff in property stocks and banks.

But RHB said there were still “bright spots” for APAC Realty, despite expectations volumes would drop.

For one, developers have started countering the measures with “more realistic” pricing and the offers of discounts of 5-10 percent in new launches, RHB said, adding that should draw more first-time buyers. Developers were also offering higher agency commissions of 3-4 percent at some launches, compared with the typical 1.5 percent, it said. It also noted that around 200 more units were sold last week at new launches, despite the measures.

APAC Realty also got around 35 percent of its first quarter gross profit from the “very stable” segments of non-brokerage income, leasing and HDB resale, it said.

But RHB lowered its fiscal 2018-20 net profit forecasts by 22-35 percent, mainly on lower transaction volume assumptions, and it slashed its target price to S$0.77 from S$1.35.

However, it noted the stock still has an “attractive” 2018 dividend yield of around 6 percent, based on its revised earnings forecast, and that it was trading at a 25 percent discount to global peers on a price-to-earnings basis. Rival PropNex’s shares were also trading at a 54 percent premium to APAC Realty’s, based on 2017 price-to-earnings ratios, it said.

Shares of APAC Realty ended Friday down 0.83 percent at S$0.60.


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