Given the bright prospects of Singapore's real estate market, PropNex is optimistic about its outlook for this year.
This year marks the 25th anniversary of PropNex's establishment, and Gafoor has expressed an optimistic view in light of this milestone. The mainboard-listed company is willing to distribute a special dividend to commemorate this occasion.
The official pointed out that the number of apartments for sale this year, including units that remained unsold in the past few years, will reach approximately 20,000. It is anticipated that around 12,850 new units will be launched this year, compared to only 7,300 new units in 2024.
The increase in the number of apartments for sale is a favorable sign for this market leader, which boasts the largest army of agents in Singapore—nearly 13,000 agents as of January 24.
In the first half of 2024, PropNex's agents sold more than half (55.5%) of the new housing stock, including executive condominiums, non-landed properties, and landed properties.
During the same period, the agency also captured the largest share in the resale markets for public apartments and private real estate, at 66.5% and 60.1% respectively.
In the six-month period, it accounted for 48.4% of transactions in the landed property resale market and 37% of transactions in the private rental market.
PropNex's financial year 2024 results are set to be announced at the end of February.
Although the recently launched new condominiums have been well-received, Gafoor noted that it takes the agency three to four months to realize revenue from these projects.
As such, the launch of these new developments will only contribute to the company's financial performance in the fiscal year 2025, he said.
Nevertheless, favorable market conditions such as the reduction in borrowing costs following the Federal Reserve's interest rate cut last September and stable employment levels have bolstered real estate demand.
"People can secure fixed rates of 2.5% to 2.6% for two years. Consequently, market confidence has indeed shifted in the last quarter, and this momentum has continued in the recent launches," Gafoor added.
Technology-Driven Foundation
Despite commanding a dominant 63.3% share of the local private residential and public housing resale markets, PropNex is striving to elevate this figure to at least 66%.
The company's CEO explained that this expansion would yield more data, which would be provided to its agents, their clients, and developers to facilitate informed decision-making. This strategy aims to help the company fend off challenges from proptech platforms while elevating its role beyond that of a mere intermediary.
For instance, developers can access sales data on design concepts, unit mixes, and price points, as PropNex possesses comprehensive market statistics.
"Our data is continuously provided by our agents 24/7," said Gafoor, adding that even Singapore's Department of Statistics (Singstat) may not have the latest information due to the time required for property registration.
Leveraging technology, the company launched an exclusive service in January, likened by the CEO to a private banking service. This allows its agents to send personalized property reports to selected past clients quarterly, updating them on the latest transaction prices, valuations, and insights related to their properties.
PropNex has invested heavily in technology, though it declined to disclose annual expenditures. Over 25% of its 200 employees work in IT, and last August, the company reallocated 5% of its IPO proceeds, amounting to S$2 million, to enhance its technological capabilities.**
Investor Confidence and Shareholder Returns
In recent months, investors have flocked to PropNex's stock, anticipating the company's ride on the real estate boom and the distribution of a special 25th-anniversary dividend. As of February 6, the stock had risen by 16.4% over the past year.
Gafoor openly acknowledged that shareholder returns would be more substantial with the special dividend. "If you look at our cash position, I think we are well-positioned to consider such returns."
As of June 30, 2024, PropNex had no borrowings and a cash reserve of S$134.4 million.
Even without the special dividend, the company has been exceptionally generous to shareholders—distributing dividends exceeding the 75% to 80% stipulated in its dividend policy. For example, it paid out 87.6% of its earnings in the first half of fiscal 2024 and 92.9% of its net profit in fiscal 2023.
Gafoor noted that PropNex, with its asset-light and cash-generating business model, positions itself as a dividend investor.
He added that the company is not in urgent need of funds, enabling it to allocate resources to shareholders.
Calm Amid Constraints
When asked about potential acquisitions that might necessitate tapping into its cash reserves, the 61-year-old helmsman stated that such corporate actions would be challenging for PropNex in Singapore, given its market-leading position and potential regulatory scrutiny.
For overseas ventures, cash outlays are unnecessary, as PropNex advances through a franchising model, generating franchise fees and a share of commissions from day one.
PropNex operates in Malaysia, Indonesia, Cambodia, Vietnam, and Australia. Its Malaysian franchisee has performed exceptionally well, prompting the Singaporean entity to acquire a 20% stake.
Gafoor attributes PropNex's competitiveness and appeal to its training programs, dual career path structure allowing agents to eventually take on managerial roles, and support systems.
Thanks to the influx of new and experienced staff, the agency is on track to achieve its goal of having 15,000 sales personnel in Singapore by 2026.
"We tend to recruit most of the new agents," he noted.
Although, unlike some peers, the agency does not cover its agents' annual licensing fees and professional liability insurance premiums, Gafoor explained that this is because PropNex does not want to "retain unproductive agents."
Diversified Revenue Streams and Resilience
Regarding the potential impact of any cooling measures on its business, Gafoor pointed out that the agency has diversified its revenue streams.
In the first half of fiscal 2024, about 50% of its revenue—comprising 20% from HDB resales, 23% from leasing (typically recurring income), 3% from commercial and industrial properties, and 5% from landed property resales—was resilient or unaffected by such measures.
The remainder, including private resales and project marketing, is more susceptible to government actions aimed at curbing rising property prices and market exuberance.
"Our business is diversified," Gafoor said. "No single cooling measure would slash our revenue by 40% to 50%—it won't. It just takes people a month or two to understand and recalibrate their strategies to overcome these challenges."
The share price of PropNex rose by 3.7% today.
