Roxy-Pacific Holdings - SAC Capital 2021-08-11: Exiting The Bottom


Roxy-Pacific Holdings - Exiting The Bottom

  • Roxy-Pacific (SGX:E8Z) posted a 19.6% y-o-y increase in revenue to S$141.2m in 1HFY21, from S$118.1m a year ago. This was largely due to revenue growth from the property development segment (+27.4%), which covered the decrease in revenue in the hotel ownership segment (-29.2%). Property investment segment increased slightly (+8.5%). Other income increased, including one-off S$4.1m fair value gain from investment property at NZI Centre, S$2.8m forex gain, and S$1.1m government grant.
  • Roxy-Pacific's overall 1HFY21 PATMI was S$5.9m, up 2.1x from S$2.8m a year ago. Net debt to adjusted NAV rose from 0.64x (Dec 20) to 0.70x. Adjusted NAV per share was S$0.7287 (Jun 21), up from S$0.7215 (Dec 20).

Property development

  • Property development, which made up 89.6% of Roxy-Pacific's 1HFY21 revenue, increased from S$99.3m to S$126.5m in 1HFY21, largely due to higher percentage of revenue recognition from RV Altitude, View at Kismis and 120 Grange, partially offset by absence of revenue recognition from Octavia Killara and West End Glebe which obtained TOP in FY2020.

Hotel ownership and Property investment

  • Hotel ownership, which made up 7.6% of Roxy-Pacific's 1HFY21 revenue, continues to be hit by the border control measures in the tourism industry. Their hotels comprise 1 in Singapore, 2 in Japan, 1 in Maldives and 1 under development in Thailand (expected to be ready in FY22). The current situation in each of these countries are:
    • Singapore is seeing higher visitor arrivals now compared to half a year ago, recording 10,030 arrivals in June and 14,190 in May, up around 4-5 times that of a year ago. Hotel room revenue fell to S$64.3m in June, from S$67.9m in May. Average occupancy sat at 53%, from 50% before. In addition, Singapore has started to allow Taiwan travellers to enter without serving compulsory SHN from August 7, provided conditions, including a negative COVID test, are met. This marks the start to its travel corridor plans, expected early September, with more countries.
    • Japan had reimposed a state of emergency, with more prefectures included in their “quasi-emergency stage” for these measures.
    • As of its July 2021 update, travel restrictions are lifted in Maldives, subject to conditions, including a negative COVID test, for inbound tourists.
  • Property investment made up the remaining 2.8% of Roxy-Pacific's 1HFY21 revenue and comprises rental income from shop units in Roxy Square and NZI Centre. Occupancy ratios as at 30 June 2021 (based on lettable area) were 82% and 100% respectively.

Roxy-Pacific's upcoming development projects

  • As at 30 June 2021, based on units sold from ongoing development projects, Roxy-Pacific had total attributable pre-sale revenue of S$564.4m (up from $552.1m in Jan 2021), which would see profit recognition from 1 July 2021.
  • Roxy-Pacific previously acquired two 999-year/freehold sites at Jalan Molek/Guillemard Road (100% interest) and Institution Hill (42% interest). A total of 197 units is expected, which they plan to launch for sale from 2HFY21.

Private residential property prices unwavering from its highs

  • The private residential property price index hit 163.5 in Q2 2021 (Q1: 162.2). This was an increase of 0.8%, compared to the 3.3% increase in Q1.
  • As at Q2, 19,384 private residential units remained unsold (Q1: 21,602, Q4 20: 24,300). In face of the rising housing demand, developers have been seeking to replenish their land banks. However, the current low supply in the market will continue to be a driver of private property sale prices, especially as many high-net-worth individuals continue to park their investments and buy homes in Singapore.
  • Furthermore, property cooling measures may not be entirely unlikely for HDB flats, with the increasing number of million-dollar flats sold, especially as they are supposed to be more affordable. If that happens, private residential properties will become more attractive.

Expect high construction costs, delays in construction still

  • Singapore’s construction sector has been facing manpower supply crunch ever since the border restrictions which significantly reduced the number of foreign workers allowed to enter. Singapore in July announced a pilot programme to bring in foreign workforce to address the issue, which has been trialled on Malaysia and India workers.
  • We expect high construction costs and delays in construction to continue, at least in the near-term, as the recovery of the construction sector hinges on the successful easing of shortage on manpower.
  • Higher global vaccination rates will be catalyst, but the highly transmissible Delta variant and the worsening situation in key manpower supply areas like Malaysia and India continue to pose as headwinds.
  • See

Lim Li Jun Tracy SAC Capital Research | https://www.saccapital.com.sg/ 2021-08-11
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000