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DBS: APAC Realty Ltd – Fully Valued Target Price $0.41

Posted on October 5, 2022October 5, 2022 By alanyeo No Comments on DBS: APAC Realty Ltd – Fully Valued Target Price $0.41

Hit by fresh round of cooling measures 

Impacted by another round of cooling measures.  Barely a year after the last round of cooling measures announced in December 2021, the government has introduced several fresh measures to cool the property market, including new restrictions to curb quantum and taper demand. (Please refer to table on page 3 for a summary of the measures)

More targeted at HDB segment this time round. This time round, the measures are more targeted at the HDB segment while the reduction in the total debt servicing ratio (TDSR) would reduce affordability and also affect the private property market. The HDB resale index has gained 5.2% since December 2021, vs a 4.2% gain for the overall private residential index. 

ERA has a 41.8% market share as at 1H22 in the HDB resale segment. About one-third of its revenue is generated from this segment. The balance two-thirds is split between private resale and new launches. Contribution from each segment varies, depending very much on the new launch pipeline.

Impact on APAC’s profitability has been short-lived in the past but expect a prolonged impact this time round. APAC has a proven resilient business model, allowing the group to maintain profitability during economic downturns and property market cycles. Average net profit for 2010 to 2020 is S$17m. Net profit in 2014 and 2015 was down about 30% y-o-y but rebounded strongly in 2016. Post the 2018 cooling measures, net profit in 2019 was down 43% y-o-y but recovered in 2020.

However, this time round, with the two rounds of cooling measures announced less than a year apart, the impact could be harder and net profit could take a longer time to rebound.

APAC-cooling-measures-30sep2022Click here to Download Full Report in PDF

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Research - Equities Tags:APAC Realty Ltd

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