• FY14 PATMI up 5% to S$96.7m
• Profits recognized from 8 Russell
• Growing recurring income base

4Q14 results broadly in line

Roxy’s 4Q14 PATMI increased 4% YoY to S$46.5m mainly due to a surge in share of profits from associates (up from S$3.1m in FY13 to S$42.7m in FY14) with the recognition of sales profits and fair value gains from 8 Russell Street retail units, partially offset by lower development profits. Adjusted FY14 PATMI, excluding fair value gains, cumulates to an estimated S$92.4m which constitutes 108% of our full year forecast and is judged to be within expectations. In terms of the topline, FY14 revenue fell 14% to S$317.8m due to a decline in contributions from the property development segment, mitigated by growth in the hotel and investment property segments. A final cash dividend of 1.297 S-cents per share is proposed.

Growing recurring income from investment assets

Roxy continues to sit on a hefty S$656.6m of progress billings from already sold units which will be recognized over FY15-17. Given the slowdown in the core domestic residential segment, sales at the group’s latest projects Sunnyvale Residences (30% sold) and Trilive (25% sold) have slowed somewhat. That said, management has focused on strengthening its recurring income base from investment properties over FY14. Revenues from rental assets increased from S$1.6m in FY13 to S$6.6m in FY14, as contributions from 59 Goulburn Street in Sydney (acquired in Jul-14) came online. Hotel segment revenue increased 3% to S$47.9m in FY14 as the average occupancy rate improved from 86.1% in FY13 to 91.2% in FY14, partially offset by a reduced average room rate which dipped 4% YoY to S$184.5. We understand the group continues to see acquisition opportunities in Malaysia and Australia, particularly in key cities, and aims to work closely with experienced partners in these markets. Our valuation model is updated with a marginally higher discount rate and softer residential sales and ASP assumptions, and our fair value estimate dips to S$0.55 from S$0.61 previously. Maintain HOLD.

Source: OCBC Research - 17 Feb 2015