Apac Realty&rsquo s FY2025 earnings rose 184.9% to $20.6 million, driven by a 20.6% increase in new private home sales. The company plans to pay dividends of 4.05 cents per share, representing a 6.3% yield.

 

RHB Bank Singapore has downgraded APAC Realty to neutral from buy with a new target price of 80 cents.

 

APAC Realty&rsquo s share price has more than doubled this year on the back of a strong pick-up in primary residential sales, which resulted in a more than a doubling of 1HFY2025 ended June 30 net profit to $11.3 million.

 

" We think the share price has risen slightly ahead of fundamentals, trading at a hefty 16x FY2025&rsquo s forecast P/E ratio. Earnings are expected to decline slightly next year as volumes normalise. However, the dividend yield of round 5% mitigates the downside," says Vijay Natarajan, vice-president, real estate and REITs, at RHB.

 

Earnings from new home sales are typically recognised with a two-to-four-month lag and gross margins of this segment are in the mid- to high-teens compared to mid-single digits for the resale segment. The outlook for new home sales remains positive from strong sales at new launches but is expected to moderate from a strong 1HFY2025, RHB says.

 

&ldquo We expect 2025 primary residential sales volumes (including executive condominiums) to be at 9,000-10,000 units (+30-40% y-o-y), while resale market volumes (private and public) are expected to remain relatively stable y-o-y,&rdquo Natarajan notes.

 

Year-to-date, ERA&rsquo s agent count has risen by around 3% to 8,894 agents, with a 24% market share.

 

APAC Realty has proposed a one-for-five bonus issue to reward shareholders. The proposed bonus issue would result in a 16.67% increase in outstanding shares of 359.2 million. The bonus shares will also improve liquidity, since the stock' s pre-bonus free float is a modest 35% RHB says. The record date for the bonus issue will be Sept 19.

 

A key upside catalyst would be unlocking value from the sale of ERA Centre, continued strong residential sales momentum, and fund flows from the EQDP programme.