Roxy-Pacific Holdings - OCBC Investment 2019-04-17: Not Calling The Bottom Yet


Roxy-Pacific Holdings - Not Calling The Bottom Yet

  • Bumper crop in Mar’19.
  • Number of launches coming up.
  • Fair Value of S$0.41.

1,054 units sold in March

  • As a recap, recent URA statistics showed that developers sold 1,054 private units (excluding ECs) for Mar’19. This represented a 47.2% y-o-y / 131.6% m-o-m increase in transactions. This is not surprising, given that 1,821 units were launched following the Chinese New Year festivities.
  • Also, unsurprisingly, the top selling project for the month was Treasure at Tampines (289 units out of 490 units launched), with a total project size of 2,203 units.
  • For 1Q19, total private units sold amounted to 1,946 units, representing a 20% y-o-y increase. The bumper supply in 2019 should continue to drive sales, but potential buyer fatigue, translating into a more subdued sell-through rate would be a cause for concern.

Relief at Farrer Road, competition in Bukit Timah

  • Looking at ROXY-PACIFIC HOLDINGS LIMITED (SGX:E8Z)’s landbank, we note that the 4 projects in its pipeline face somewhat mixed prospects. Its 85-unit development at 22 Farrer Road could be a beneficiary from the sale prohibition of units at the former Normanton Park site, as reported by The Business Times (BT). According to the BT, the Controller of Housing has issued a no-sale licence on the project as Kingsford Huray Development (project developer) has failed to meet the requirements for a sale licence (see report). Given that the former Normanton Park site could yield ~1,882 units, this could boost prospects for the launch of 22 Farrer Road, which we believe should be launched before June’19.
  • On the other hand, we expect keen competition for the Roxy-Pacific’s projects at 15, 17 & 19 Lorong Kismis and Dunearn 386, given the upcoming 285 units coming onstream from the redevelopment of the former Royalville by Allgreen, as well as Mayfair Modern and the continued sales of Mayfair Gardens.

Fair Value of S$0.41

  • Roxy-Pacific recently announced that it has signed a management deal with Park Hotel Group to open Park Hotel Melbourne in 2022, as part of its plan to build recurring income streams. Still, we believe the market will be focused on its upcoming launches, and it would thus be too early to call the bottom for Roxy-Pacific, even as Roxy-Pacific's share price has dropped by 26% on a 12- month basis.
  • We continue to maintain our HOLD rating and fair value estimate of S$0.41 for now.

Joseph Ng OCBC Investment Research | 2019-04-17
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.410 SAME 0.410