PropNex started at Buy by UOB KayHian as low-risk proxy to Singapore property

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UOB KayHian started PropNex at Buy with S$0.65 target price, calling it a low-risk proxy to the Singapore property market.

“PropNex offers a more asset-light approach to Singapore property, compared with developers that face huge capital outlays on land
bidding and construction, development risks and holding costs,” it said in a note last week.

“The cooling measures (announced on 5 July 2018) have constrained developers in terms of their new-launch pricing, consequently thinning their margins. However, their agency business has been particularly insulated due to higher commissions from developers to incentivise agents, a strong pipeline of mandates (20 projects) until end-2019, and a still-resilient resale market supported by en blocers’ replacement demand,” it added.

It noted that PropNex is the largest real-estate agency in Singapore, with nearly 44 percent of the residential primary private  market last year. The company’s dual career path, training culture, marketing platform and competitive compensation mean it has higher retention and growth of its agent network, UOB KayHian said.

After the recent decline following the cooling measures, the stock offers an attractive 12.3 percent free cash flow yield, with 5.5 percent dividend yield for 2019, it said.

Shares of PropNex ended Friday down 0.89 percent at S$0.555.

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