SINGAPORE (May 15): OCBC Investment Research is reiterating its “buy” rating on Roxy-Pacific with a fair value estimate of 60 cents.

This came on the back of the group announcing that its 1Q18 earnings have increased 19% to $7.0 million, compared to $5.91 million in 1Q17.

Revenue came in at $46.4 million, 29% lower than $65.4 million a year ago, mainly due to lower contribution from the Property Development and Property Investment segments, partially offset by higher revenue from Hotel Ownership segment.

See: Roxy-Pacific's 1Q earnings up 19% to $7 mil on higher income from associates

The research house deems this set of results to be broadly within its expectations.

In FY18, the group will be looking to launch six additional development sites, bringing its total tally to eight.

The Navian, which was launched in Jan 2018, has sold 77% of its units as of May 3, while the group’s Harbour View Gardens was more than 90% sold since its launch in April.

In a Tuesday report, analyst Joseph Ng says, “These results bear testament to the robust underlying residential demand, and management’s ability to execute launches involving smaller/niche projects well.”

The analyst opines that the group’s management has also been nimble to the asset cycles, and has done a commendable job in recycling capital.

Recently, the group entered into a Heads of Agreement to sell 117 Clarence Street at a price of A$153 million ($153.4 million), having only purchased it in Dec 2015 for a total consideration of A$81 million.

See: Roxy-Pacific to sell Sydney CBD office building for $153.4 mil

This follows on the heels of the group’s sale of 59 Goulburn Street, Sydney for A$158 million in Oct 2017, having purchased it in mid-2014 for A$90.2 million.

See: Roxy-Pacific to sell Sydney property for $164 mil

“Notwithstanding the positives as outlined above, we have adjusted our fair value downwards from 66 cents to 60 cents, having taken into account the group’s recent 1-for10 bonus share issuance,” says Ng.

As at 4.10pm, shares in Roxy-Pacific are trading at 52 cents or 17.9 FY18 earnings, with a dividend yield of 2.6%.