OCBC Investment Research (OIR) has downgraded Propnex OYY from ‘buy’ to ‘hold’ while upgrading its target price from 91 cents to 96 cents, given the recent uptick in market activity.
October saw a surge in new private home sales, reaching an 11-month high of 738 units and this is expected to continue into November.
This is supported by strong performances from new launches such as Chuan Park, which sold 76% of its 916 units, and Emerald of Katong, which sold 99% of its 846 units.
OIR analyst Donavan Tan notes that the introduction of new homes from these highly anticipated projects have rejuvenated the market, with buyers who were previously sidelined re-entering.
Tan raises his FY2024 and FY2025 free cash flow (FCF) assumptions by 6.1% and 7.1%, respectively.
Tan notes that the risk-reward profile seems less attractive at current levels and investors seeking to diversify their holdings may want to consider switching to stocks with greater upside potential.
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Despite the downgrade, Tan expects PropNex to remain a solid dividend yield play. He projects a dividend payout of 90%, implying FY2024 and FY2025 yields of 5.6% and 6.1% respectively.
As at 11.05am, units in Propnex are trading flat at 90 cents.
