SINGAPORE (Feb 27): OCBC Group Research is maintaining Roxy-Pacific at “hold” given sales of RV Altitude and Fyve Derbyshire which were launched in January have come under expectations with only 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,” says OCBC analyst Joseph Ng,
In Singapore, Roxy-Pacific has another four Singapore projects in the pipeline, with launches largely to be during 2Q-3Q19.
In Australia, the group has largely exhausted its landbank, except for its 40% stake in the New World Towers project in Brisbane, where sales have been stagnant after its initial launch due to challenging market conditions.
In Sydney, The Hensley has obtained its TOP in Dec 2018, which will see contribution recognised in 1Q19 upon settlement.
On the hospitality front, management says Grand Mercure Singapore Roxy should witness rates stability 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 pickup from Nov 208 has been encouraging.
To recap, Roxy-Pacific reported 29% lower earnings of $5.9 million in 4Q18, bringing FY18 earnings to $23.8 million, 27% lower compared to a year ago.
See: Roxy-Pacific posts 27% drop in 4Q earnings to $5.9 mil on lower revenue, higher expenses
4Q18 revenue came on the back of lower revenue from the group’s Property Development segment, due to the absence of revenue recognition from Trilive and lower revenue recognition from Straits Mansions.
The group’s Hotel Ownership segment posted revenue growth of 6% y-o-y due mainly to contribution from Noku Osaka -- which was 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 $8.0 million, 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.
“We maintain our fair value estimate of $0.41 for now,” says OCBC.
As at 2.38pm, shares in Roxy-Pacific last traded at 40 cents.