UOB KayHian downgraded PropNex to Hold from Buy after earnings came in below expectations and as transaction volumes are expected to be weaker.
“Private resale volumes are expected to remain subdued as owners postpone their decisions to sell,” UOB KayHian said in a note Friday. “Management noted that the private resale market is still feeling the effects of the cooling measures and recent economic uncertainties.”
Sales volumes for private resale properties in the first half fell 51 percent on-year, UOB KayHian noted.
The brokerage noted new unit sales are expected to get support from a pipeline of 45 projects, or around 17,000 units, which will be launch ready this year and next. However, revenue from transactions at initial launches would likely only be recognized in following quarters, with revenue recognition coming a few months after the option-to-purchase is issued and after a time-lag for processing documents.
PropNex reported on 13 August its second quarter net profit fell 11.9 percent on-year to S$3.70 million on lower commission income in the wake of the Singapore government imposing property cooling measures a year earlier.
UOB KayHian lowered its 2019 net profit estimate by 14 percent to factor in a steeper decline in resale volumes.
The brokerage lowered its target price to S$0.50 from S$0.60, with an entry price of S$0.45.
Shares of Propnex ended Monday down 1.0 percent at S$0.50.