APAC Realty on Aug 29 entered a joint venture to conduct brokerage and real estate businesses in China’s Hainan province.
It holds a 40% stake in the JV, ERA Hainan Estate Marketing Co, which will also establish training and licensing programmes for real estate agents in Hainan.
See: APAC Realty enters brokerage and resale market in Hainan with 40%-owned JV
“While near-term earnings contribution may not be significant, the move provides lot of intangible benefits in terms of understanding the dynamics of real estate agency business in China, and potentially cross-selling its Singapore projects to Chinese clients,” Natarajan says.
“In our view, these diversification strategies are pivotal for long-term earnings sustainability and will help mitigate cyclical vagaries of Singapore’s real estate market,” he adds.
RHB’s target price on APAC represents an upside of 33%.
According to Natarajan, the stock currently trades at a “reasonable” price-to-earnings (PE) ratio of 8.8 times for FY18. Meanwhile, its closest peer, PropNex, is trading at 12.7 times historical FY17 PE – a 60% premium to APAC’s FY17 PE.
As at 11am, shares in APAC Realty are trading half a cent lower at 57.5 cents, implying an estimated dividend yield of 6.8% for FY18.
