Overview of PropNex Ltd

PropNex Ltd, Singapore’s largest real estate agency, commands a dominant position in the residential primary private and Housing Development Board (HDB) resale market. With a robust market share and an asset-light business model, PropNex is a key player in Singapore’s real estate landscape. Its ability to generate consistent free cash flow and maintain a defensive dividend yield has made it an attractive investment prospect.

Key Investment Highlights

The outlook for PropNex in 2025 is poised for growth, driven by increased transaction volumes and rising property prices in both the private and HDB markets. UOB Kay Hian maintains a BUY rating on the company, raising the target price from S\$0.98 to S\$1.18, reflecting an upside potential of 10.3% from its current share price of S\$1.07.

Strong Earnings Momentum

PropNex demonstrated sequentially strong earnings in the second half of 2024, a trend expected to continue into 2026. New home launches in Singapore saw a significant increase, with over 100% half-on-half (hoh) growth in 2H24 and a projected 76% hoh growth in 1H25. PropNex’s revenue recognition timing suggests robust profit growth in 2H24, 1H25, and 2H25.

Market Leadership

With a market share of around 50% for new launches, PropNex has consistently outperformed its competitors. Notable successes include selling 230 units (46% market share) at Chuan Park and 191 units (53% market share) at Nava Grove during 2H24. This dominance underscores its strong brand presence and operational efficiency.

Potential Special Dividend

In 2025, PropNex celebrates its 25th anniversary since its founding in 2000. The company is well-positioned to reward shareholders with potential special dividends, supported by its robust financial health. As of 1H24, PropNex reported S\$78m in retained earnings, S\$116m in net cash, and S\$18m in long-term deposits. By end-2024, net cash is estimated to reach S\$142m, equivalent to S\$0.10 per share.

HDB Market Resilience

The HDB resale segment remains strong due to long Build-To-Order (BTO) waiting periods, driving buyers towards resale units. HDB resale prices are projected to grow 8-9% year-on-year (yoy) in 2024, with resale volumes forecasted at 29,000-30,000 units, an 8.5%-12.2% yoy increase from 26,735 units in 2023.

Financial Performance and Metrics

PropNex’s financial performance reflects its operational strength and scalability. Key metrics include:

• Net turnover: S\$907m forecasted for 2025, up from S\$845m in 2024.
• EBITDA: Projected to grow from S\$56m in 2024 to S\$66m in 2025.
• Net profit margin: Expected to improve to 5.9% in 2025 from 5.7% in 2024.
• Dividend yield: A defensive yield of 5.6% for 2025, with potential for higher payouts.
• ROE: Estimated at 38.1% for 2025, highlighting its efficient capital utilization.

Market and Regulatory Risks

While the company’s outlook remains positive, certain risks could impact its performance:

Interest Rates

Interest rates have become less of a deterrence for Singapore homebuyers. Local banks have reduced home loan rates to as low as 2.45% per annum, and the Singapore 10-year government bond yield is forecasted at 2.7% by end-2025. However, fluctuations in global economic policy could influence these rates.

Cooling Measures

With Singapore’s general elections approaching, the risk of government-imposed cooling measures has increased. Potential measures include higher Seller Stamp Duties (SSD), an extended SSD period, or stricter total debt servicing ratios for borrowers.

Delays in New Launches

Regulatory approval delays in 2H24 led to deferred new launches, some of which are now scheduled for 1H25. Despite these delays, the overall growth trajectory for 2025 remains resilient.

Valuation and Recommendation

UOB Kay Hian maintains a BUY rating on PropNex with a revised target price of S\$1.18, up from S\$0.98. This upgrade reflects an increased PE multiple of 14.6x, one standard deviation above the company’s historical average since 2021. The valuation also factors in PropNex’s strong cash flow generation, with free cash flow estimated at S\$60m-S\$65m annually for 2025-26.

Key Catalysts for Share Price Growth

• Continued strong sell-through of new property launches in 1H25, positively impacting 2H25 earnings.
• Higher-than-expected price increments in both private residential and HDB resale markets.
• Potential for a higher final dividend in 2024, signaling increased shareholder returns.

Conclusion

PropNex Ltd is well-positioned to capitalize on Singapore’s dynamic real estate market. With strong financials, market leadership, and a commitment to shareholder returns, the company offers a compelling investment opportunity. UOB Kay Hian’s revised target price of S\$1.18 reinforces its confidence in PropNex’s growth prospects. Investors should closely monitor upcoming property launches, regulatory developments, and potential special dividends in 2025 as key drivers of value.