DBS upgrades PropNex to a buy rating, lifts target price on expected ‘rebound’ in property market

DBS Group Research on Monday (Jan 6) upgraded its call for real estate agency PropNex to “buy” and raised its target price on the counter by 21.1 per cent to S$1.15 from S$0.95 previously. 

This comes as the research team forecasts a positive earnings outlook for PropNex in 2025 amid a “strong pipeline of new launches” for Singapore’s property market, which it expects to rebound after 2024 clocked “lacklustre volumes” for new launches. 

DBS Group Research analysts Derek Tan and Tabitha Foo said: “With lower mortgage rates and a larger potential launch pipeline of 13,000 units across various projects islandwide, we anticipate stronger sales momentum in 2025.” 

Noting that sales momentum is set to normalise to historical levels, Tan and Foo anticipate “a rebound in overall volumes in 2025, driven by new sales”. 

This rebound will be further supported by stable property prices as well as buyers purchasing homes for their own stay, a wider array of projects with strong attributes and lower mortgage rates, said Tan and Foo. 

Another factor behind their bullish outlook is PropNex’s extensive sales network across Singapore – which Tan and Foo believe positions the group to further grow its market share from its current force of about 12,000 agents or 34 per cent of the market share by number of agents. 

“With a large sales force and tech-enabled initiatives that enhance agents’ familiarity with market movements, PropNex is well-positioned to increase its market share across various segments, including new home sales, private resale, HDB resale and rentals,” they said. 

Tan and Foo predict transaction volumes for 2025 to 2026 to stand at around 8,000 to 8,500 units, with private resale volumes remaining stable at 13,500 to 14,000 units.

Considering that PropNex’s market share in private new sales and resale has surpassed pre-pandemic levels by a “significant” margin and climbed to around 56 to 60 per cent, this indicates that one in every two sales is conducted by a PropNex agent, said Tan and Foo. 

“As PropNex adds to its sales force… (the) potential increase in market share would present upside potential to our estimates,” they said. 

With the property market as well as PropNex’s earnings at an “inflexion point”, the research team posits an “attractive” dividend yield forecast of 7.7 per cent in FY2025/2026.

Should the real estate agency choose to distribute its cash reserves to shareholders at S$0.16 apiece, there may be “potential upsides” to this figure, added Tan and Foo. 

However, they cautioned that the group’s sales performance could prove slower than projected if weighed by an economic slowdown and higher-than-expected interest rates. 

As at the midday trading break on Tuesday, shares of PropNex were trading 0.5 per cent or S$0.005 higher at S$0.95.