Property developer Roxy-Pacific Holdings has been on the radar of SAC Capital, following an offer it received on Sep 20 to delist.

The pre-conditional voluntary general offer was made by TKL & Family for all the issued ordinary shares in the company. The offeror is also the bid vehicle for a consortium formed by 11 individuals including Teo Hong Lim, chairman and CEO of Roxy-Pacific.

See: Roxy-Pacific's chairman Teo offers 48.5 cents to privatise company

The offer price of 48.5 cents is a 33.4% discount to the company’s net asset value of 72.87 cents/share as at Jun 30.

This takes into account the fair value Grand Mercure Roxy Hotel, Noku Kyoto, Noku Osaka, hotel under development in Phuket, Noku Maldives and the head office premise, which were valued at $679.6 million as at June 30. 

For comparison, the net book value of the properties stood at $216.2 million then.

At present, the undertaking parties hold 76.4% of the total number of issued shares.

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SAC Capital analyst Tracy Lim believes that Roxy-Pacific is emerging from the trough following a 19.6% y-o-y increase in its revenue to $141.2 million in 1HFY21.

This is thanks to a 27.4% y-o-y jump in its property development segment.

“We believe that with residential prices holding up, along with Roxy-Pacific’s unbooked contracted sales, toplines will be firm for the group,” Lim writes in a non-rated report on Sep 22.

As at Jun 30, the group’s total attributable pre-sale revenue came in at S$564.4 million based on units sold from ongoing development projects.

The group also has two properties under development that is estimated to have a development value of $224.1 million.

However, high construction costs and delays continue to pose headwinds and squeeze property developers’ margins, notes Lim.

“The manpower supply crunch may have slowly been easing but we see that the backlogs and delays are still ahead of the rate of manpower intake. The recent uptick in cases in foreign workers’ dormitories also pose as a risk,” she adds.

Still, property development activities have helped offset the 29.2% drop in revenue in the hotel ownership segment.

Lim reckons the segment will remain weak even as Singapore looks to open vaccinated travel lanes with more countries. 

The analyst notes that Singapore-listed property developers are trading at a significant discount to their adjusted net asset values, with discount rates ranging from 15.0% to 73.6%.

The companies with the largest discounted adjusted net asset value include Hong Fok Corp (73.6%) and Chip Eng Seng (59.0%).

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Lim also sees Bukit Sembawang Estates as an attractive company, despite the 22.4% year-to-date increase in its share price.

The company had net cash of $391.1 million in its FY ended 31 March – which Lim says - places them in a strong position to replenish land bank.

“They are also able to tap on unutilised bank facilities,” she says adding that the company also has a pipeline of residential launches.

As at 2.58pm, shares in Roxy-Pacific Holdings were flat at 47 cents.

Cover image: Roxy-Pacific