Roxy-Pacific Holdings - OCBC Investment 2019-02-25: Subdued Sales Start In SG


Roxy-Pacific Holdings - Subdued Sales Start In SG

  • 4 more projects in SG.
  • Still scouting for yield assets.
  • Fair Value of S$0.41.

Lower contribution by property development segment

  • ROXY-PACIFIC HOLDINGS LIMITED (SGX:E8Z)’s 4Q18 revenue fell 29% y-o-y to S$30.8m on the back of lower revenue from the group’s Property Development segment, due to the absence of revenue recognition from Trilive (TOP in June 2018) and lower revenue recognition from Straits Mansions (TOP in Oct 2018). The Hensley (Sydney) has obtained its TOP in Dec 2018, which will see contribution recognized in 1Q19 upon settlement.
  • Roxy-Pacific’s Hotel Ownership segment clocked revenue growth of 6% y-o-y due mainly to contribution from Noku Osaka (acquired in Oct 2017) and higher contribution from Noku Maldives after its full operation in Aug 2018.
  • Overall gross profit margin grew 13ppts to 41% in 4Q18, due mainly to higher profit margin from the group’s Property Development segment. Other operating expenses grew 93% y-o-y to S$8.0m, but due mainly to higher unrealized forex loss and writeback of over provision of selling expenses for the sale of Goulburn Street building in 4Q17.
  • All-in, PATMI for the quarter fell 27% y-o-y to S$5.9m.

Cautiousness reigns in Singapore

  • Roxy-Pacific has another 4 Singapore projects in the pipeline, with launches largely to be during 2Q-3Q19. RV Altitude and Fyve Derbyshire were launched in Jan’19, and we note that sales have been somewhat under expectations (14-15% sold).
  • Moving forward, we believe that the group will be exercising considerable prudence in landbanking in Singapore, given the heightened risks to property development. We think the group would still be on the lookout for investment properties overseas, but the yield compression in major cities would be a key challenge.
  • In Australia, Roxy-Pacific has largely exhausted its landbank, except for its New World Towers project in Brisbane (of which it has a 40% stake), where sales have been stagnant after its initial launch due to challenging market conditions.
  • On the hospitality front, management noted that Grand Mercure Singapore Roxy should witness stability in rates this year, following a period of heightened supply in the market over the past few years.
  • In Japan, adverse weather posed a challenge for the group’s properties in Kyoto/Osaka, but a better occupancy pick-up from Nov’18 has been encouraging.
  • We maintain our fair value estimate of S$0.41 for now.

Joseph Ng OCBC Investment Research | 2019-02-25
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.410 SAME 0.410