1. Ismail Gafoor, CEO of Singapore’s largest property agency PropNex, had a moment of Freudian slip when he told the agents that the total commissions have crossed S$1 billion during a private event.
2. Someone reported to SGX with screenshots and PropNex was questioned. This is to figure out if a significant piece of information was released to a group of people and that some could unfairly act on the privileged information for their own profits.
3. PropNex clarified that not all the commissions would be recognised as revenue because the deals have to be completed. Hence, it is still unconfirmed if PropNex has achieved S$1b revenue for FY21.
4. PropNex’s main competitor, APAC Realty, has just released their FY21 results and it was fantastic. Revenue grew 87% from S$395m to S$740m while net profit jumped 116% from S$16m to S$35m.
5. APAC Realty announced a 4c dividend per share, the highest dividend distributed in its history. And this is after an ordinary dividend of 3.5c and a special dividend of 3c given after the mid-year results. Total dividend for FY21 was 11.5c. That’s a 18% dividend yield based on the current share price.
6. For the first 9 months of 2021, PropNex’s revenue was already $715m, almost close to what APAC Realty has achieved for the full year. It was a 100% gain for its revenue. Using this assumption, it means PropNex could double FY20’s revenue of $516m and that would give PropNex $1b revenue in FY21.
7. This just shows that the Singapore property market has been red hot and the government had to impose more measures to cool it.
8. Their share prices have done well too. PropNex and APAC Realty share prices have gone up 50% and 124% respectively from a year ago.
9. Looking at some metrics. We got PE ratio of 12x for PropNex and 9x for APAC. Historical div yield of 5.4% for PropNex and 8.1% for APAC (excluding the final div payment and special). These suggest the stocks are rather cheap. But it is important to know that the revenue isn’t recurring and properties are cyclical.
10. Such growth rates are unsustainable and they tend to fluctuate with the overall property market sentiment. The metrics can deteriorate suddenly should the cycle turns.
11. The Singapore property sector should continue to do well in an inflationary period or at least remain resilient despite the cooling measures. But I don’t expect the real estate agencies to double their revenue in FY22. I believe most of the positive sentiments and expectations have been priced in. The best time to buy such stocks are usually at the bottom of the cycle, not near the top.
