Advertisements

Positives priced in

  • 3Q21 PATMI rose 113.2% y-o-y to S$14.4m, above expectations 
  • 3Q21 revenue climbed 97.9% y-o-y to S$234.4m, with growth across all segments
  • Expecting lower volume of new launches sold to weigh on FY22F earnings
  • Maintain HOLD, TP revised to S$1.84

Investment Thesis: 

Positives priced in, EPS has potentially peaked with risk of cooling measures an overhang. Our HOLD recommendation is premised on the stock’s rich valuation (+1.7 SD of its historical mean) despite our view that EPS could taper sideways in the next few years. Furthermore, the stock is at risk of de-rating if property cooling measures are announced. 

Advertisements

Expecting lower volume of new launches sold to weigh on FY22F earnings growth. We believe that PropNex’s growth potential may be held back by lower volumes of new launches sold in the next few years. This is based on depleting inventory of unsold new launches as well as construction delays. In addition, c.40% of the inventory of new launches are in the CCR, which are priced higher and have less demand.
Higher contribution from the resale segment to weigh on margins. Due to the lower supply of new launches, we are expecting a higher contribution from the resale segment, which has lower gross profit margins.

Valuation:

Maintain HOLD with a slightly higher TP of S$1.84. Our TP is based on 12.0x FY22F PE, which +1.7 SD of its historical mean, reflecting the strong momentum in the property market. 

Advertisements

Where we differ:

We are slightly more optimistic on earnings than consensus.

Key Risks to Our View:

Property cooling measures, a rise in interest rates, delays in new launches due to lockdowns, tightening of foreign workers policy, and rise of disruptors in the industry.