Roxy-Pacific’s 1Q14 net profit came in at S$15.0m, up 27% YoY due to stronger contributions from its core property development segment. 1Q14 net profit forms 17.5% of our full year forecast and is judged to be within expectations, as we expect FY14 to be a mostly back-loaded year with No. 8 Russell Street’s contributions rolling in over the fourth quarter. 1Q14 revenues increased 48% YoY to S$79.5m again due to higher progressive recognition from property developments, primarily Space@Kovan and the MKZ.

Performance at the group’s key hotel asset, Grand Mercure Roxy Hotel, remained firm; average occupancy rate increased to 90.2% in 1Q14 from 79.2% in 1Q13, while average room rates dipped 3% YoY to S$190.5. While the group’s core development business will likely face continued headwinds from an uncertain domestic residential outlook, we like management’s strategy of growing recurring income and diversifying its portfolio geographically. Maintain HOLD with an unchanged fair value estimate of S$0.61 per share.

Source: OCBC Research - 5 May 2014