Supported by high dividend yield
- 1H22 EPS of 4.7 Scts was deemed broadly in line at 65.6% of our FY22F forecast.
- Higher new home sales income helped moderate a fall in resale and rental commissions.
- Reiterate an Add rating with an unchanged TP of S$0.84.
1H22 results highlights
APAC reported 1H22 revenue of S$342.6m, -4.4% yoy while PATMI slipped 2.1% yoy to S$16.7m. The weaker yoy performance was largely due to a 19% yoy drop in total new, resale and HDB resale market volume transactions in 1H22. APAC’s overall market share stood at 40% as at 1H22. Gross profit was stable at S$35.3m as GP margin improved to 10.3% (vs. 9.8% in 1H21) due to a shift in revenue mix towards the higher yielding new home sales segment. Associates’ profit was S$0.3m vs. a S$0.3m loss a year ago, coming mainly from Vietnam. APAC declared an interim dividend of 3.5 Scts (75% payout ratio),
translating to an annualised yield of c.10%.
Weaker resale and rental commission on decline in market volumes
APAC generated S$199m (58% of 1H22 revenue) from resale and rental commission income. The 9.6% yoy decline in resale and rental revenue was due to a 21.4% and 6% drop in private and HDB resale market transaction volumes, respectively. Meanwhile, the rental market also registered an 8.9% contraction in leasing activity. APAC expects transaction volumes for private and HDB resale segments could decline 15-23% yoy in FY22F due to the adverse impact from the Dec 2021 property cooling measures. It anticipates increases of 1-3% in private property prices and 4-8% in HDB resale prices due
to limited new private supply and delays in the completion of new HDB apartments. In Feb 22, APAC established its Capital Markets & Investment Sales (CMIS) business unit to engage individual and institutional investors with services across the commercial, industrial, retail and residential sectors. To date, CMIS has recorded over S$26m in transaction value.
Slight increase in new home sales commissions yoy
APAC’s 1H22 brokerage revenue from new home sales increased 4.1% yoy to S$139.3m, due to the timing of revenue recognition, even as market transaction volumes declined 40.2% yoy. APAC’s 1H22 market share for new home sales stood at 30.6%. APAC has been appointed the marketing agent for 25 projects with more than 8,200 units. As part of its strategy to boost sales and market share, ERA plans to launch SALES+, a proprietary and highly advanced super-app to provide its sales force with one-tap access to data, market trends, financial and property analysis.
Reiterate Add rating
We leave our FY22-24F EPS unchanged and maintain our TP at S$0.84, based on an unchanged blend of net cash-adjusted P/E multiple and DCF valuation. We believe share price is likely supported by a projected FY22F dividend yield of 7.8%. Potential re-rating catalysts: ability to gain further market share in both the primary and secondary residential segments and identifying new growth drivers. Key downside risk: delayed recovery of the property market due to a weak macro outlook and continued loss of market share.
