• We project strong 2QF/1H21F net earnings for APAC Realty, thanks to an active residential market
• We raise our FY21-23F earnings per share forecast for APAC Realty by 11.5-30.2%, with a similar uplift to dividend.
• Reiterate ADD rating on APAC Realty, with a higher target price of S$0.94

We Expect a Robust Performance for APAC Realty’s 2Q21F/1H21F Results

• We expect APAC Realty (SGX:CLN) to deliver robust quarterly earnings in its upcoming 2QF/1H21F results, thanks to the active residential market transactions and the low base in 1H20. We estimate a 2Q21F PATMI of S$6m-9m (1H: ~S$13.5m-16.5m).
• Taking into account the lagged billing effect, the 44% higher y-o-y (+29% h-o-h) value of 2H20 private new and resale residential deals, as well as Housing Development Board (HDB) resale transactions, should translate into strong growth in 1H21F’s topline and bottomline, in our view.
• Additionally, assuming an unchanged interim dividend payout ratio of ~34%, we estimate an interim dividend of ~S$0.013-S$0.016, or an annualised yield of 3.2-4%.

Active Residential Market to Drive Earnings Growth

• Looking ahead, we think APAC Realty is likely to maintain its strong force continues to expand to 8,148 as at 6 Aug 2021 (vs. 7,771 in Jan 2021).

Raising APAC Realty's FY21-23F Earnings Projections

• We raise our FY21-23F earnings per share (EPS) forecast for APAC Realty by 11.5-30.2% to take Indonesia, Thailand, Malaysia and Vietnam. To enhance its technological capabilities, it has a few apps, such iERA and ERA Pro, to help its agents in direct sourcing as well as supporting them in closing deals via various visual features, as well as myERA Web, to provide agents with resources to help them navigate admin and address client queries.

Reiterate ADD Rating on APAC Realty

• We raise our target price for APAC Realty to S$0.94 to APAC Realty's share price has surged 67% since its 1Q21 business update, the stock is still trading at an inexpensive 9.9x FY21F P/E. We reiterate our ADD rating.

• We continue to like APAC Realty as an asset-light proxy to the residential market. Its projected dividend yield of 5.5% (assuming an unchanged payout of 54%) is attractive.
• Key risk: property cooling measures that could slow market transactions.
• Catalyst: stronger than expected market transaction volumes.

Source: CGS-CIMB Research - 10 Aug 2021