Comprehensive Market Analysis: PropNex, Xiaomi, and More

Broker: UOB Kay Hian

Date: Tuesday, 05 November 2024

PropNex: Solid Outlook for the Next 12-18 Months

PropNex has a promising outlook for the next 12-18 months, driven by stable to higher transaction volumes in both the private and HDB markets. The company is set to benefit from an increase in new launch units, aligning with property developers’ timelines. Following the US Federal Reserve’s interest rate cut in September, several new launch projects have experienced robust sell-through rates.

The company offers a defensive yield of 6.4% for 2024 and maintains a strong market share in new launches, achieving 60-70%. Examples include The Landmark, Hillock Green, The Botany, Hillhaven, and Pinetree Hill. The US Fed rate cut has positively impacted property transaction volumes, with UOL’s Pinetree Hill witnessing a significant increase in sales.

PropNex has also revised its expectations for the HDB segment, anticipating an 8-9% year-on-year growth in HDB prices and an increase in resale volumes to 29,000-30,000 units in 2024. The company’s solid financials are reflected in its key metrics such as net turnover, EBITDA, and net profit, which are projected to grow steadily over the next few years.

With a net cash position of S\$116 million as of 1H24, PropNex is well-positioned to sustain its growth trajectory. The potential for increased dividends in 2025 further enhances its appeal to investors. The company’s strong pipeline of projects for 2025, totaling 14,694 units, is expected to positively impact its bottom line.

Hong Kong Developers and Landlords: Market Recovery and Challenges

Hong Kong’s primary property market showed signs of recovery in October 2024, with a notable increase in transaction volume. However, a pullback in November is anticipated due to lower high-quality new supply. Despite this, a 3% recovery in property prices is expected in 4Q24-1Q25, driven by rising rental yields and supportive macro factors.

Retail landlords continue to face challenges from the Greater Bay Area (GBA) integration. The number of mainland tourists to Hong Kong and Hong Kong residents traveling to mainland China increased significantly in October 2024. However, the net outflow of tourists continues to expand, indicating ongoing challenges for Hong Kong’s retail sector.

Top developers like SHKP and LINK REIT remain preferred picks due to their strong sales performance. Projects such as Cullinan Sky and Echo House have seen high sell-through rates, while others like Blue Coast II and Double Coast I have experienced slower sales.

Internet – China: Encouraging Monetisation Visibility from Adtech and LLM Upgrades

China’s internet companies have unveiled a range of upgraded AI products, showcasing their AI infrastructure development and monetisation potential. The Cyberspace Administration of China’s Interim Measures for the Management of Generative AI Services aim to foster healthy growth and regulated use of AI, promoting collaboration between industries.

Baidu’s Qingduo 2.0 has enhanced marketing efficiency, significantly improving content creation capabilities. Alibaba’s Taotian launched a sitewide promotion to boost performance and provide merchants with predictable growth, while PDD introduced a product promotion as part of its adtech upgrades.

Long Language Model (LLM) development continues to progress, with Baidu releasing Qianfan LLM 3.0 and Tencent unveiling the upgraded Hunyuan Turbo LLM. These advancements are expected to drive monetisation improvements and support the growth of AI-driven adtech solutions.

Xiaomi Corp: 3Q24 Results Preview – Share Gains and Premiumisation Drive Solid Beat in IoT Segment

Xiaomi is set to report its 3Q24 earnings, with an expected adjusted net profit of Rmb6.0 billion, 7% above Bloomberg consensus estimates. The earnings beat is primarily driven by strong sales and profitability in the IoT products segment, while the smartphone, internet services, and EV businesses are expected to be largely in line.

In 3Q24, Xiaomi’s revenue is expected to grow 25.9% year-on-year to Rmb89.2 billion, supported by a recovery in smartphone shipments and robust IoT product sales. The smartphone segment is anticipated to generate Rmb47.1 billion in revenue, with margins holding up well despite rising component costs.

The IoT segment is projected to rake in Rmb25.2 billion in revenue, driven by growth in overseas markets and the demand for large appliances in China. Xiaomi’s internet services business is expected to remain steady, with revenue rising 7.2% year-on-year to Rmb8.3 billion.

Xiaomi’s EV business is on track with over 20,000 units of the SU7 delivered in October 2024. The segment is expected to generate Rmb8.2 billion in revenue for 3Q24, with strong pre-order numbers for the newly announced SU7 Ultra variant.

Overall, Xiaomi’s net profit assumptions for 2024-26 have been raised due to higher smartphone shipments, increased IoT revenue, and improved margins. The company’s strong financial performance is reflected in its key metrics, with net turnover projected to reach Rmb420.966 billion by 2026.

With a solid balance sheet and a healthy growth outlook, Xiaomi remains a compelling investment. The company’s focus on premiumisation and market share gains in the IoT segment positions it well for sustained growth in the coming years.

Conclusion

The comprehensive analysis of PropNex, Hong Kong developers and landlords, China’s internet sector, and Xiaomi Corp highlights the diverse opportunities and challenges in the market. Each company has unique strengths and growth drivers that make them attractive to investors. As market conditions evolve, these companies are well-positioned to leverage their competitive advantages and deliver robust financial performance.