ROXY reported 3Q12 PATMI of S$8.2m, down 39% YoY, mostly due to the absence of fair value gains (~S$9.6m) from Kovan Centre in 3Q11. Adjusting for this, 3Q12 PATMI would be up 116% instead. We judge 3Q12 numbers to be a marginal miss due to slower-than-expected revenue recognition from development projects, and tweak our FY12 PATMI forecast down by 9% to S$50.4m. We are not excessively concerned, however, as the bulk of previously-launched projects are already fully sold. Since we had upgraded ROXY as a key small-cap idea on 20 Mar 2012, the shares have appreciated a whooping 42% (versus the STI up 1.7%). We see management continuing to show strong ability in seeking out and executing on accretive acquisitions, but view most positives to be priced in at current levels. Downgrade to HOLD with an unchanged fair value estimate of S$0.54 (25% RNAV discount).
Development recognition pace marginally below view
ROXY reported 3Q12 PATMI of S$8.2m, down 39% YoY, mostly due to the absence of fair value gains (~S$9.6m) from Kovan Centre in 3Q11. Adjusting for this, 3Q12 PATMI would be up 116% instead. We judge 3Q12 numbers to be a marginal miss due to slower-than-expected revenue recognition from development projects, and tweak our FY12 PATMI forecast down by 9% to S$50.4m. We are not excessively concerned, however, as the bulk of previously-launched projects are already fully sold. 3Q12 topline was S$43.6m - down 2% versus 3Q11 and again marginally below pace. For the hotel segment (Grand Mercure Roxy Hotel), 3Q12 average room rates were mostly flat QoQ at S$200.2 (2Q12: S$199.8) while average occupancy rates increased 3.8 ppt QoQ to 94.5% (2Q12: 90.7%). Management also stated a general policy to pay out at least 50% of operating profits from the hotel segment henceforth.
Firm sales conversion over 3Q12
ROXY’s projects showed healthy sales conversion in 3Q12 with the MKZ, Natura@Hillview and Nottinghill Suites coming up to 100%, 98% and 94% sold at of end Sep 2012 from 71%, 81% and 83% the prior quarter. In our view, this points to a still firm undercurrent of buyer demand and also management’s ability to execute well on project sales. Looking ahead, we expect four new launches from ROXY by 1H13 as new sites in the pipeline clear their processes with the Strata Title Board.
Most positives priced in - downgrade to HOLD
Since we had upgraded ROXY as a key small-cap idea on 20 Mar 2012, the shares have appreciated a whooping 42% (versus the STI up 1.7%). We see management continuing to show strong ability in seeking out and executing on accretive acquisitions, but in our view much of these positives are already priced in at current levels. Downgrade to HOLD with an unchanged fair value estimate of S$0.54 (25% RNAV discount).
ROXY reported 3Q12 PATMI of S$8.2m, down 39% YoY, mostly due to the absence of fair value gains (~S$9.6m) from Kovan Centre in 3Q11. Adjusting for this, 3Q12 PATMI would be up 116% instead. We judge 3Q12 numbers to be a marginal miss due to slower-than-expected revenue recognition from development projects, and tweak our FY12 PATMI forecast down by 9% to S$50.4m. We are not excessively concerned, however, as the bulk of previously-launched projects are already fully sold. 3Q12 topline was S$43.6m - down 2% versus 3Q11 and again marginally below pace. For the hotel segment (Grand Mercure Roxy Hotel), 3Q12 average room rates were mostly flat QoQ at S$200.2 (2Q12: S$199.8) while average occupancy rates increased 3.8 ppt QoQ to 94.5% (2Q12: 90.7%). Management also stated a general policy to pay out at least 50% of operating profits from the hotel segment henceforth.
Firm sales conversion over 3Q12
ROXY’s projects showed healthy sales conversion in 3Q12 with the MKZ, Natura@Hillview and Nottinghill Suites coming up to 100%, 98% and 94% sold at of end Sep 2012 from 71%, 81% and 83% the prior quarter. In our view, this points to a still firm undercurrent of buyer demand and also management’s ability to execute well on project sales. Looking ahead, we expect four new launches from ROXY by 1H13 as new sites in the pipeline clear their processes with the Strata Title Board.
Most positives priced in - downgrade to HOLD
Since we had upgraded ROXY as a key small-cap idea on 20 Mar 2012, the shares have appreciated a whooping 42% (versus the STI up 1.7%). We see management continuing to show strong ability in seeking out and executing on accretive acquisitions, but in our view much of these positives are already priced in at current levels. Downgrade to HOLD with an unchanged fair value estimate of S$0.54 (25% RNAV discount).
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