• btmakingcents

COL (Ret) Ismail Gafoor [Propnex SGX: OYY]

Updated: Aug 8, 2020

These are my reasons for buying into PropNex and why it is always on my watch list.

Will be honest about this, I bought PropNex simply because I met their CEO during my ICT.

He spoke to us and although there were no references to PropNex during the time that he spent with us, it was extremely clear that he is very serious about what he does.

In other words, I did not buy into PropNex, I bought into him.

More about COL Ismail

At the point of making this decision, it was 100% discretionary trading.

I entered at $0.50 per share (September 2019) and although it dipped during the March Mayhem (thats what I call it), I find it performing relatively well at the time of writing.

Photo Credits to Google

Before we look deeper, lets look at PropNex on the surface. In recent years, PropNex has become a company which many are familiar with. I associate it with Yeo's drinks or Popular Bookstore so when it comes to property, its always PropNex for me.

If we look at their core product, although they've branched out into many different revenue streams, I would still summarize their main business as the provision of services. They facilitate the buying and selling of property which is amazing as they do not manufacture what they sell. If we look at the many business models out there, definitely with vertical integration we have ample companies manufacturing and selling their products.

In this case, PropNex only sells property (doubt they will go into property development? I'm not sure maybe they did in any case a good business as well)

From where I see it, this is an excellent position as they do not need to ever pay for what they are selling. It can be as simple as selling a $10m property and their commission is maybe idk 1% and BAM its 100k as revenue? If you take an airline for example, how many passengers need to fly for them to earn 100k in revenue?

Of course some may argue that there is more to the rationale presented above but from my point of view, it does seem like quite a logical viewpoint.

Furthermore, from my very basic understanding of how things work , I do know that property value in Singapore rises over time (Hopefully stays that way) so it does look like a price increase on their end will always be justified.

Compared to a tyre manufacturer where to even sell a tyre, the business has to pay for the raw material cost, in the case of PropNex as they deal with buying and selling of property, expenses are low as there is no major costs apart from manpower. (Agents earn commission from buying and selling etc.).

For this company to increase its revenue, all its needs do is expand to new markets and open an office. It wouldn't be like an airline where they gotta fork out millions to get one more aeroplane which will take years to pay off before we can see the return on investment.

Once again, I know this is an extremely one-sided and simple view of things but it does sound logical to me.

Before we take a look at the numbers, lets look at some very basic metrics referenced from SimplyWallStreet.

  1. Current price of $0.52 is 65.9% below its fair value. (May not be accurate but good news is good news.

  2. Trading at reasonable PE Ratio of 7.5x

  3. Average divided yield of 7.21%

Insider buying of approx. 2,300,000 shares bought within the past 3-6 months.

If we dig a little deeper in to all the technical/financial indicators, its alot to take in and honestly I really couldn't do a better job so do take a look at these brilliant links below.

From SG Stock market Investor - I really like the Author. I follow his page very closely. His article on PropNex is definitely more credible than mine

Also referenced from his page is the PropNex FY 2019 Report

I will continue to increase my position in PropNex and my faith in it will hold so long as COL Ismail remains its CEO. The current trading price at the point of writing is $0.52 per share. Would be good to enter in stages as given the state of our economy, there is room for further potential downside.

Disclaimer: The information published here are purely opinions/feedback and should in no way be taken as guaranteed. Readers are encouraged to do their due diligence by engaging in sufficient research before making any decisions based on materials provided.

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