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3 Questions About APAC Realty Ltd Answered

APAC Realty Ltd (SGX: CLN) is a real estate services provider that was listed on Singapore’s stock market at the end of September last year. It has three main business segments: real estate brokerage services; franchise agreements; and training, valuation, and other ancillary services. The real estate brokerage services segment is operated by its wholly-owned subsidiary, ERA Realty Network Pte Ltd, one of the largest real estate agencies in Singapore.

Shares of the company have gone up by slightly more than 40% since going public at S$0.66 per share. However, before you jump on the bandwagon to own a piece of the business, it is important to understand more about the company. Here are three questions about APAC Realty’s financials, growth drivers and valuation answered.

How much money did the company make?

Earlier this month, APAC Realty posted its financial results for the first quarter ended 31 March 2018.

Revenue for the latest quarter swelled to S$105.2 million from S$67.2 million a year ago, an increase of 56.7% year-on-year. The company breaks down the revenue into two smaller components – real estate brokerage fees and related services; and other. Real estate brokerage fees and related services revenue improved 57.3% to S$103.7 million mainly due to an increase in brokerage income from the resale and rental of properties, and new home sales. Other revenue went up 22.3% to S$1.5 million largely on the back of higher income from business conference, rental income and interest income.

APAC Realty said that it “benefited from a recovery in the Singapore residential market, which experienced a substantial increase in transaction volume for the private secondary market”. The private residential property price index rose by 3.9% for the first quarter of 2018, and it was the steepest quarter-on-quarter gain since the second quarter of 2010.

Net profit improved by 46.8%, from S$4.0 million a year ago to S$5.9 million in the 2018 first-quarter.

As of 31 March 2018, APAC Realty had S$63.5 million in cash and bank balances with no debt. In comparison, at the end of last year, it had a cash hoard of S$62.0 million.

Operating cash flow for the latest quarter more than tripled to S$1.7 million from S$440,000 exactly a year back. Capital expenditure was S$23,000 in the 2018 first-quarter as compared to S$61,000 in the 2017 first-quarter.

In 2017, APAC Realty made S$400.6 million in revenue, up 39.2% from 2016. Meanwhile, net profit grew 63.1% year-on-year to S$25.9 million.

What does the future hold?

In its market outlook statement given as part of its 2017 full-year earnings update, APAC Realty said that it is expecting prices for private homes to increase between 3% and 8% for 2018, as compared to the 1.1% increase in 2017. It added that the “good buying momentum seen in 2017 is expected to carry into 2018 and we are likely to see overall transaction volumes exceeding well over 2017’s 25,010 units (excluding EC transactions).”

In the 2018 first-quarter earnings release, Jack Chua, executive director and chief executive of the group, said:

“We are pleased with the good set of results achieved for 1Q FY2018. The property market is recovering. Going forward, we intend to strengthen and grow our presence in Singapore and the Asia-Pacific region, expand our range of services, and enhance our technological capabilities to remain a leader in our industry and a stalwart of the ERA brand here in Singapore and across the region.”

What is the business worth now?

APAC Realty closed at S$0.94 yesterday, giving a trailing price-to-earnings ratio of 11.2 and a dividend yield of 2.1%. In comparison, when it went public, it was sold at 14.8 times its 2016 earnings.

As a further context, the SPDR STI ETF (SGX: ES3), an exchange-traded fund which can be taken as a proxy for the Straits Times Index, was going at a price-to-earnings ratio of 11.4 and had a distribution yield of 2.8% yesterday.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P owns shares in APAC Realty Ltd.