Roxy-Pacific Holdings - OCBC Investment 2018-05-15: Small Is Beautiful

Roxy-Pacific Holdings - OCBC Investment 2018-05-15: Small Is Beautiful ROXY-PACIFIC HOLDINGS LIMITED SGX: E8Z

Roxy-Pacific Holdings - Small Is Beautiful

  • 1Q18 PATMI growth of 19% y-o-y.
  • Good take-up at FY18 launches.
  • Fair Value of S$0.60.

Broadly in-line 1Q18 scorecard

  • Roxy-Pacific’s 1Q18 revenue decreased by 29% y-o-y to S$46.4m, due mainly to lower recognized revenue from the group’s property development segment, especially with lower revenue recognition from Trilive, and absence of revenue recognition from Jade Residences, Whitehaven and LIV on Wilkie following the completion of these projects in 2017. However, this was partially offset by higher revenue recognition on construction progress and sales of The Navian and Straits Mansions
  • The group’s hotel ownership segment saw a 21% y-o-y increase due mainly to contribution from its newly acquired hotel in Osaka, Japan and higher revenue from its resort in Maldives after its partial opening. 
  • All considered, 1Q18 PATMI rose 19% y-o-y to S$7.0m. We deem this set of results to be broadly within our expectations.

Healthy demand at recent launches

  • Roxy-Pacific will be looking to launch an additional 6 development sites in FY18, bringing the total tally to 8 – a possibility we highlighted in our previous report. 
  • The Navian, which was launched in Jan 2018, has sold 77% of its units (as of 3 May 18), while the group’s Harbour View Gardens was more than 90% sold since its launch in Apr 18. These results bear testament to the robust underlying residential demand, and management’s ability to execute launches involving smaller/niche projects well.

Asset recycling afoot

  • In our opinion, management has also been nimble to the asset cycles, and has done a commendable job in recycling capital. 
  • The group has recently entered into a Heads of Agreement to sell 117 Clarence Street at a price of A$153m, having only purchased it in Dec 15 for a total consideration of A$81m. This follows on the heels of the group’s sale of 59 Goulburn Street, Sydney for A$158m in Oct17, having purchased it in mid-2014 for A$90.2m. 
  • Notwithstanding the positives as outlined above, we have adjusted our fair value downwards from S$0.66 to S$0.60, having taken into account the group’s recent 1-for-10 bonus share issuance.
  • (Maintain BUY).

Joseph Ng OCBC Investment | 2018-05-15
SGX Stock Analyst Report BUY Maintain BUY 0.60 Down 0.660