PropNex's 1Q earnings surge 279% to $7.6 mil as revenue gets lift from property market recovery

By Uma Devi / The Edge Singapore | May 15, 2020 11:32 AM SGT
SINGAPORE (May 14): Real estate agency PropNex posted earnings of $7.6 million for 1QFY2020 ended March, some 278.8% higher than earnings of $2.0 million a year ago.
This lifted earnings per share (EPS) for the group by 280% to 2.05 cents from 0.54 cents in the corresponding quarter last year.
This was primarily attributable to a 82.7% increase in revenue to $135.6 million from $74.2 million last year due to increases in commission income from agency services, and project marketing services due to the higher number of transactions.
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PropNex says the spike in transaction volume came on the back of the much-awaited recovery of the private residential market following the property cooling measures announced back in July 2018.
“Despite lingering macro uncertainties from the previous year, buyers and investors were willing to commit in the first quarter due to the attractiveness of new project launches and the desirability of rightly priced developments that were previously launched,” says PropNex CEO Ismail Gafoor.
“The effects of the cooling measures from July 2018 seemed to have passed and the real estate market was bouncing back,” adds Gafoor.
The company noted that some $80 million in gross commissions from property transactions in FY2019 were carried forward to 1QFY2020, and contributed to the higher number of transactions for the quarter.
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EDGEPROP SINGAPORE -  “The effects of the cooling measures from July 2018 seemed to have passed and the real estate market was bouncing back,” says PropNex CEO Ismail Gafoor
“The effects of the cooling measures from July 2018 seemed to have passed and the real estate market was bouncing back,” says PropNex CEO Ismail Gafoor
Cost of services for the quarter increased 80.3% to $120.5 million from $66.9 million last year as commissions paid to salespersons increased in tandem with the hike in commission income.
Correspondingly, gross profit for the quarter doubled to $15.1 million from $7.3 million a year ago.
While PropNex acknowledges that the impact of the Covid-19 pandemic could be felt throughout the Singapore economy in 1QFY2020, the performance of the real estate market has been “encouraging” with all segments recording year-on-year increases in transaction volume.
This was largely buoyed by projects such as The M, Executive Condominium Parc Canberra and Treasure at Tampines.
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PropNex also says that it transacted the most units in 1QFY2020 among joint marketing agencies appointed by the developers of most of the projects that were launched.
As at end-March, cash and cash equivalents stood at $89.8 million.
In its outlook statement, PropNex says property viewings and marketing roadshows have been suspended in light of the Covid-19 pandemic, alongside the temporary closure of project sales galleries. In addition, developers are adopting a wait-and-see approach, before deciding to go ahead with their project launches.
The group believes that the private residential segment could see a 27% year-on-year contraction in volume in 2020 to an estimated 14,000 units based on URA statistics, but remains optimistic that previously launched rightly priced projects will continue to attract buyers and investors.
On the public housing front, PropNex estimates that the HDB resale market volume could drop 7% to the range of 21,000 to 22,000 flats for 2020.
Shares in PropNex closed one cent lower, or 2.02% down, at 48 cents on Thursday prior to the results announcement.