PropNex

[weijian]

How nice to see you still active Specuvestor. Markets could get interesting soon and I'm starting to spend a little more time looking for ideas again.

I actually like APAC and Propnex a lot (not at current prices though) because they are a toll booth on SG real estate market and each of them own about a third of the market. It's crazy why they are allowed to get so big and if you are a developing a big project, you really don't have a lot of choices when it comes to choosing a marketing agent.

For Hopefluent, it is unfortunately one of many agents, and from the margins charged by them to developers, it is obvious that HF has no bargaining power. So much so that it has to be a 'lender' to the developers.

Both companies (Hopefluent vs APAC/Propnex) have similar models, but the former is in a big market while the latter is in a market with efficient scale. Someone once taught me the theory that oligopolies are the best form of business to invest in and after some practice, I think the theory is right. And I think the latter got so big because the Singapore property market is not really big (looking at Propnex's AR21 and assuming they have 50% of the agency market --> 2*957mil annual revenue --> 1.9billion market for property commissions)

I reckon property agencies are a good proxy play on the Spore property market, although I still feel the best way to get exposed is to get a property yourself. But of course, investing in property agencies come with lower leverage (and hence lower risks) and required capital outlay. But one thing for sure is that property agencies are a better proxy play than investing into developers (and especially those family owned ones).