Propnex upgraded to Buy by UOB Kay Hian as Singapore property market remains robust

A Singapore 10-dollar note Photo by Leslie Shaffer

UOB Kay Hian upgraded Propnex to Buy, saying the company’s fundamentals, valuation multiples and net cash position warrant a more bullish stance after the share price fell 14 percent following the release of its first half results.

“The Singapore property market remains robust and we believe the company’s third quarter 2021 business update will be a strong one. In the next 6-12 months, earnings surprises could come from successful en bloc projects,” UOB Kay Hian said in a report Wednesday.

UOB Kay Hian attributed the post-earnings share price drop to profit-taking after rising more than 116 percent year-to-date.

“We highlight that there is still a lot to like about Propnex,” the note said, adding the stock is trading at an “undemanding” 2022 price-to-earnings ratio of 11.8 times, with a prospective yield of 6.5 percent.

For the upcoming third quarter business update, the brokerage forecast strong transaction volumes from all of its business segments.

“Given the time lag between property transactions and actual recognition of revenues and profits, we expect Propnex to continue generating strong results into at least the first quarter of 2022,” the note said.

UOB KayHian increased its earnings forecasts for Propnex, upgrading 2021, 2022 and 2023 estimates by 10 percent, 13 percent and 7 percent, respectively, on greater confidence in Singapore’s property market overall, with slightly higher volume assumptions for private and HDB sales and a moderate increase in projected profit margins.

However, the brokerage lowered its target price to S$1.97 from S$2.09 after rolling forward valuation to 2022 forecasts and lowering its target price-to-earnings multiple to 11.1 times from 12.5 times previously.

Shares of Propnex ended Wednesday up 3.55 percent at S$1.75.