APAC Realty has been downgraded from “Buy” to “Neutral” by RHB, with a revised target price of S$0.80, reflecting a 9% downside. The downgrade follows a 129% year-to-date increase in the company’s share price, driven by robust primary residential sales and a significant rise in first-half net profit. However, RHB analysts believe the current valuation, trading at 16 times the forecasted price-to-earnings ratio for 2025, is unsustainable as earnings are expected to decline slightly next year.
The downgrade comes despite a dividend yield of approximately 5%, which offers some mitigation against the potential downside. Analyst Vijay Natarajan noted that the share price has surged ahead of the company’s fundamentals, suggesting a correction might be on the horizon as sales volumes normalise.
This development is significant for investors who have been buoyed by APAC Realty’s recent performance. The company’s rapid share price increase has been a highlight in the market, but the downgrade serves as a cautionary note about potential overvaluation. The adjustment in rating and target price underscores the importance of aligning market expectations with realistic financial forecasts.
Looking ahead, investors will need to consider the implications of this downgrade on their portfolios, particularly in light of the anticipated normalisation in sales volumes. The dividend yield remains a positive aspect, but the overall outlook suggests a more cautious approach may be warranted.
