Results Analysis: Excellent 1H21 results underpinned by strong demand
1H21 Results Analysis
Excellent 1H21 results underpinned by strong demand, in line. 1H21 revenue jumped 107% y-o-y to S$358.4m, due to higher contribution from all market segments. Transaction volumes were relatively healthy across all market segments, buoyed by optimism in the outlook for the Singapore economy and the relatively low interest rate environment. Revenue from new home sales/ resale and rental increased 146%/95% y-o-y in 1H21. Net profit surged 120% to S$17m, accounting for 65% of our forecasts, roughly in line as 2H21 could be weaker due to the recent tighter measures in place to curb the worsening COVID-19 situation. 
Higher Interim and one-off special dividend declared; sets 50% to 80% payout ratio. The group has declared an interim DPS of 3.5Scts (vs 0.75Scts in 1H20) and a one-off special DPS of 3Scts. The interim DPS represents a dividend payout ratio of 73% based on 1H21 earnings, which works out to an annualized dividend yield of c.8.5%. The group has also established a dividend policy to distribute 50% to 80% of its profits as dividends on a semi-annual basis. In FY20, dividend payout ratio was 54%.
Higher market share. ERA’s market share in the new home market improved to 32.1% from 27.9% a year ago. ERA maintained a healthy 41.1% market share in the overall residential property market in 1H21, compared to 38.4% in 1H20, in terms of transaction volume for new homes, private residential and HDB, but excludes leasing transactions.

Earnings & Recommendation
Maintain BUY, raised TP to S$1.05. We have raised our TP to S$1.05 (Prev, S$0.74) pegged to +1SD of its 5-year average PE of c.14x on FY21F earnings, vs our previous basis of 5-year average PE of c.10x, given the current buoyant property market. This is on the back of the improvements in both the Covid19 situation as more people are inoculated, and the economy. Though share price has gained c.90% YTD, it still lags peer’s Propnex performance of c.150% gain during the same period.

Risks:property cooling measures. With the property price index maintaining its uptrend, coupled with the recent record prices for new launches and land, we read such strong momentum with caution given possible actions to cool the strong demand for property. Furthermore, MAS Chief  has also highlighted the potential of levying a property gain tax in recent media comments.