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Propnex Limited Versus APAC Realty Limited: Which Is the Better Company?

Royston Yang

Propnex Limited (SGX: OYY) and APAC Realty Limited (SGX: CLN) are two listed real estate brokerage businesses listed on the Singapore stock exchange. Propnex was listed less than a year ago in July 2018 while APAC was listed in September 2017. Each company has its own merits, but I will be looking at certain aspects of each company to determine which may be the better company to invest in.

As a quick introduction, Propnex has four business segments, namely, real estate brokerage, training, property management, and real estate consultancy. The company’s name stands for “Property Network for Excellence”, and it has 7,565 sales agents in Singapore as of 25 March 2019, making it Singapore’s largest real estate brokerage firm by salesforce.

APAC Realty, on the other hand, has three business segments — real estate brokerage services; franchise agreements; and training, valuation and ancillary services. It operates its real estate brokerage services business through its wholly-owned subsidiary ERA Realty Network Pte Ltd which has around 6,490 sales agents in Singapore.

I will be looking at three aspects of each company to determine their attractiveness — regional presence, gross and net profit margins, and valuations/dividend yield.

Regional presence

Regional presence represents the reach of the company and is represented by how many countries it has a presence in, and how many sales agents it has in total.

It seems from the above table that APAC Realty has a wider presence in Asia, even though Propnex has more agents in Singapore. Overall, APAC Realty has almost three times as many agents as Propnex, spread out in countries such as Thailand, China, Taiwan, Korea and Cambodia. In contrast, Propnex is mainly focused on just four countries, namely, Singapore, Malaysia, Indonesia and Vietnam.

Gross and net margins

Gross margins measure how well a company can price its products, while net margins measure the efficiency of a company in managing its costs and expenses.

For FY 2018, APAC Realty had both a higher gross and net margin as compared to Propnex. This shows that the company probably had more bargaining power when it came to pricing its services, while a higher net margin also shows evidence of better expenses control. It seems fair to compare the ratios for both companies as they are operating mainly in Singapore and are dealing predominantly in Singapore real estate.

Valuation and dividend yield

Valuations can determine how cheap or expensive a stock is, and signals the attractiveness of its shares relative to the value the company brings. Dividend yield measures the percentage return an investor obtains (through the receipt of dividends) when holding on to the shares of a company.

From the table, it appears that APAC Realty is trading at a slightly cheaper valuation as compared to Propnex, at 9.2x price-earnings against 10.7x price earnings. APAC Realty has a 7.1% historical dividend yield, which is much higher than Propnex’s 5.7%, and it pays a twice-yearly dividend compared to Propnex which only pays once a year. Also, do note that for FY 2018, Propnex has declared a final dividend of 1.5 Singapore cents and a special dividend of 2.0 Singapore cents, bringing full-year dividend to 3.5 Singapore cents. If we only accounted for the final dividend alone, the dividend yield for Propnex would fall to just 2.5%. Comparing APAC Realty’s 7.1% yield versus Propnex’s 2.5% yield, we can see which is the clear winner in terms of dividend yield.

The Foolish takeaway

From the metrics above, it seems that APAC Realty is the overall winner. It has a wider regional presence, more agents in its overall network, better gross and net margins, and is also trading at a cheaper valuation and a higher dividend yield. While it is prudent to also go through other aspects of each company such as its balance sheet and cash flow generation, just a simple comparison of these metrics should give an idea of how attractive each company is relative to each other.

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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 Royston Yang does not own shares in any of the companies mentioned.

Motley Fool Singapore 2019