Singapore's largest real estate agency PropNex has reported lower FY2024 earnings which missed estimates as well. However, analysts, citing improving prospects and a generous dividend, have raised their respective target prices.
The company reported earnings of $40.9 million for the year ended Dec 31, 2024, down 14% over the preceding FY2023. Revenue in the same period was down 7% y-o-y to $783 million, due to smaller number of new launches.
However, in the last quarter of 2024, new launches picked up significantly and the momentum is seen to continue into this year, with new launches nearly doubling to 13,000 units.
With PropNex's market share of project launches, this will translate into improved numbers for its current 1HFY2025, analysts reason.
In the nearer term cheer, PropNex plans to pay a final dividend of 3 cents per share, plus a special dividend of 2.5 cents to mark its 25th anniversary. This brings PropNex's FY2024 payout to 7.75 cents a share, equivalent to a payout ratio of 140% and a yield of 6.8% based on Feb 25 closing price.
"We do not rule out the possibility of another special dividend from its 1HFY2025 results, which we expect to be strong," writes UOB Kay Hian's Adrian Loh in his Feb 26 note.
See also: UOBKH lowers TP for Delfi by 3% to 82 cents after earnings missed expectations
Loh believes that with general elections round the corner, additional cooling measures are unlikely. "In our view, any cooling measures would likely target the HDB resale segment which has seen strong price increases in the past five years," he says.
Loh is keeping his earnings projection for the current FY2025 and FY2026 but has raised his target price from $1.18 to $1.30, which is based on a target PE multiple of 17.6x is 1.5SD above the company’s average PE since 2021.
"In our view, this high multiple is not a stretch given that PropNex has an asset-light business model that generates positive free cash flow annually, which by our estimates will generate over 40% ROE in 2025-27," says Loh.
Derek Tan and Tabitha Foo of DBS Group Research are similarly bullish. They've kept their "buy" call along with a higher target price of $1.25, up from $1.15, which is based on 15x FY2025 earnings, which is 1 sd above the five-year average.
They believe that PropNex's expected dividend yield of around 6.5%, based on a payout ratio of 80%, could be higher if the group distributes more of its cash reserves estimated at 15 cents per share.
Eric Ong of Maybank Securities is more restrained. He notes that developers "tactically" deferred their mega new launches to 4qFY2024 to captalise on Fed rate cuts and pent-up demand.
The resultant spillover effect has inspired Ong to raise his FY2025 to FY2027 earnings forecasts by 9-23% due to spill-over effects.
Ong has raised his target price from 87 cents to $1.14 but has kept his "hold" call given PropNex's compelling dividend yield.
PropNex shares changed hands at $1.12 as at 2.12 pm, down 1.75% for the day but 27.3% in the past one year.
