Roxy-Pacific Holdings

OCBC on 4 May 2012

ROXY reported 1Q12 PATMI of S$9.0m, down 10% YoY mostly due to lower development numbers as we await revenue recognition from projects yet to begin construction. With this in mind, we judge 1Q12 results, marred by lumpy recognition, to be broadly on track for our FY12 forecast. 1Q12 topline came in at S$38.1m, similarly down 24% YoY due to the impact from the construction gap. ROXY recently acquired Jade Towers in the Upper Serangoon area, via an en-bloc process, for S$106.27m. We estimate a breakeven cost at around S$1,250 psf and anticipate ASPs of S$1,450 psf. We continue to favor the company for its spot-on execution and note torrid sales conversion at recently launched projects, Eon@Shenton, Natura@Hillview and the Millage. We raise our fair value estimate to S$0.45 (S$0.62 pre-bonus-shares), mostly due to accretion from Jade Towers and a lower RNAV discount of 25%. Maintain BUY.

1Q12 marred by lumpy revenue recognition
ROXY reported 1Q12 PATMI of S$9.0m, down 10% YoY mostly due to lower development numbers as we await revenue recognition from projects yet to begin construction. With this in mind, we judge 1Q12 results, marred by lumpy recognition, to be broadly on track for our FY12 forecast. 1Q12 topline came in at S$38.1m, similarly down 24% YoY due to the impact from the construction gap. Over the quarter, revenue was recognized at The Verte, Nova 88, Studios@Tembeling, Straits Residences, Spottiswoode 18 and Space@Kovan.

Land-banking continues unabated
ROXY recently acquired Jade Towers in Upper Serangoon, via an en-bloc process, for S$106.27m. This translates to about S$816 psf GFA for the 92k sq ft freehold site with a plot ratio of 1.425. We expect ROXY to redevelop this site into a 170-unit residential project and estimate a breakeven cost of ~S$1,250 psf. We note nearby freehold Casa Cambio is selling in the range ~S$1,450 and similarly anticipate average selling prices of S$1,450 psf for the Jade Tower project.

Healthy numbers at the Hotel segment
ROXY’s hotel segment put up healthy numbers during the quarter. On a YoY basis, average occupany rates increased to 92.8% from 91.6% in 1Q11. Average room rates also came up 8.3% YoY to S$201.5. Overall revenue per available room rose 9.8% to S$187.0. We maintain a positive outlook for the hotel sector in FY12 and expect steady performance ahead.

Maintain BUY – fair value raised
We upgraded ROXY on 20 Mar 2012 and the stock returned 16.1% since then; also outperformed the STI by 15.6%. We continue to favor ROXY for its spot-on execution and note torrid sales conversion at recently launched projects, Eon@Shenton, Natura@Hillview and the Millage. Attributable progress billings now stand at a solid S$778.9m. We raise our fair value estimate to S$0.45 (previously S$0.62 pre-bonus-shares), mostly due to accretion from Jade Towers and a lower RNAV discount of 25%. Maintain BUY.