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APAC Realty Ltd’s 2018 Third-Quarter Earnings: Improvements in Revenue and Net Profit

APAC Realty Ltd (SGX: CLN) is a real estate services provider which has 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 the company’s wholly-owned subsidiary, ERA Realty Network Pte Ltd, one of the largest real estate agencies in Singapore.

Yesterday, APAC Realty released its financial results for the third quarter ended 30 September 2018. Let’s look at how the company performed.

Financial highlights

Total revenue for the reporting quarter rose 8.8% to S$114.8 million. The improvement was on the back of higher real estate brokerage fees and related services revenue, and other revenue.

Revenue from real estate brokerage fees and related services went up 8.8% mainly due to higher brokerage income from resale and rental of properties, and new home sales. Other revenue increased by 5.7% mostly on the back of higher interest income.

Higher contribution from resale and rental of properties helped to increase gross profit by 7.9% to S$14.8 million.

Net profit climbed 18.8% to S$6.5 million. However, earnings per share (EPS) rose by only 4.5% due to an enlarged share base in the latest quarter following APAC Realty’s initial public offering (IPO) in September 2017. Assuming the issuance of new shares due to the IPO took effect on 1 January 2017, earnings per share would have gone up 18.8%, from 1.55 Singapore cents in the 2018 third-quarter to 1.84 Singapore cents in the 2017 third-quarter.

On a nine-month basis, total revenue improved 26.3% to S$342.1 million and net profit rose 11.8% to S$20.2 million.

APAC Realty had S$51.5 million in cash and bank balances, with S$58.0 million in total borrowings, as of 30 September 2018. This translates to a net debt position of S$6.5 million. In comparison, at the end of 2017, the company had S$62.0 million in cash hoard with no debt. During the 2018 third-quarter, the company borrowed money for a commercial property acquisition at 450 Lorong 6 Toa Payoh, Singapore.

Operating cash flow for the 2018 third-quarter went up by 55.2% to S$12.0 million with negligible capital expenditure in both the 2017 and 2018 third quarters.


Looking ahead, APAC Realty commented:

“The Singapore government introduced a fresh round of property cooling measures on 5 July 2018 where the additional buyer’s stamp duty was raised and loan-to-value ratio was reduced. This will affect the underlying demand for residential properties in Singapore. The Singapore property market may also be affected by any adverse global economic conditions and changes in mortgage interest rates.”

It added that the “uncertainty caused by the US-China trade tensions and interest rate hikes will also likely weigh down market sentiment in the near term.”

The Foolish takeaway

APAC Realty produced a healthy set of results for the 2018 third-quarter. However, there are short-term headwinds for the company, especially with the new property cooling measures.

In the long-term, though, it should do well. The government’s intention with the cooling measures is to ensure that the property market still grows, but in line with Singapore’s economic fundamentals.

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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.