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Foolish Face-Off: APAC Realty Ltd Versus PropNex Limited

APAC Realty Ltd (SGX: CLN) and PropNex Limited (SGX: OYY) are two real estate services providers listed on the Singapore stock exchange. PropNex just went public on Monday this week while APAC has a slightly longer history as a public company; it was listed in September 2017.

In this article, we will make some quick-and-dirty comparisons between the two companies to determine which might give you more bang for the buck.

Introducing the Contenders

APAC Realty has three primary 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.

On the other hand, PropNex has four business segments, and they are real estate brokerage, training, property management, and real estate consultancy. It operates its real estate agency through its wholly-owned subsidiary, PropNex Realty Pte Ltd, Singapore’s largest real estate agency by salesforce.

The table below shows the market capitalisation and revenue for the two firms. Market capitalisation is as of the closing prices on 2 July 2018. Do note that all figures quoted in the tables that follow are for the full year ended 31 December 2017 (FY2017) for both companies, unless otherwise stated. Round 1: Profitability

In the first round, we will analyse the profitability of the companies in terms of profit margins and return on equity (ROE). The ROE figure reveals how efficient the management is in turning every dollar of shareholders’ capital into profits.For every dollar of revenue created by PropNex, only around 5 cents were generated as profit, but for APAC, every dollar of revenue gave some 7 cents in earnings. This shows that APAC is more profitable than its counterpart. However, PropNex has a much higher ROE than APAC.

Winner: APAC, with its higher gross and net margins.

Round 2: Growth

In the second round, we will compare the revenue, gross and net profit compounded annual growth rate (CAGR) of the two firms for the past three financial years. Firms that can grow their sales and profits steadily over time should also see their share price rise.

PropNex has slightly higher revenue and gross profit growth as compared to APAC. However, APAC’s net profit growth is much superior to that of PropNex. It will be hard to determine the winner in this round, but we will go with PropNex as it manages to come out on tops in two of the three metrics above.

Winner: PropNex.

Round 3: Valuation

As Foolish investors, it is essential to focus on the value of the business and not on the daily changes in the stock price.

We will now compare the price-to-earnings (PE) ratio, price-to-sales (PS) ratio and dividend yield of the two companies. The values below are as of the closing prices on 2 July 2018.APAC has a lower PE and PS ratio than PropNex. APAC also pays a dividend but since PropNex just went public, it has yet to declare a dividend. However, PropNex’s board intends to recommend and distribute dividends of at least 50% of its net profit for the period from the listing date to 31 December 2018, and for the whole of 2019.

Winner: APAC.

The Foolish Bottom Line

Final Score: 2-1 to APAC, as it has triumphed over PropNex in two out of the three rounds.

However, we have yet to look at other important aspects of the company such as its balance sheet strength, free cash flow situation, growth prospects, and so on. Potential investors interested in APAC should research more on the company before investing their money. This simple exercise would help to take some heavy-lifting off your back though.

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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.