• Continues expansion in Australia
• Launched Noku Roxy hotel brand
• Prudent land-banking in SG

Building on diversification strategy and growing recurring income

The group continues to execute well on its diversification strategy in expanding overseas and increasing its source of recurring income. Over the last year, Roxy acquired four freehold assets in Sydney for approximately A$151.0m. Three of these sites (No. 14 Cowper St, Bayswater Road and Buckingham Rd) are slated for residential development while the 14-storey commercial building in Sydney’s CBD, in the the group owns a 50% interest, will be held for recurring income.

Management indicates that they see Australia as suitable market for expansion given that it is a stable and wellregulated real estate market with attractive supply-demand dynamics. The group also launched its new hotel brand, Noku Roxy, over the last year with a hotel in Kyoto, Japan in Nov 2015 and will also launch one more in Phuket, Thailand under this umbrella brand in 2018.

Will prudently acquire choice freehold sites in Singapore

In Singapore, the group acquired freehold housing sites in Sea Avenue and Jalan Eunos over the last year and plans to develop 57 residential units on these sites. Management expects conditions in Singapore’s residential market to remain challenging and does not expect cooling measures to be lifted over the nearer term. That said, we note that Roxy is sitting on S$384.6m of attributable progress billings which will significantly buttress earnings ahead.

Over FY15, the group’s net profit dipped 12% to S$85.2m, mostly due to an absence of a S$43.3m one-time profit from the sale of strata retail floors at 8 Russell St, Hong Kong while FY15 topline surged 45% to S$460.9m in FY15 due to a 54% and 85% increase in property development and property investment revenues, respectively.

A final cash dividend of 1.297 Scents was declared (total FY15 dividends: 1.913 S-cents). Maintain HOLD with an unchanged fair value estimate of S$0.52.

Source: OCBC Research - 14 Mar 2016