• 4Q17 PATMI dip of 39% YoY
• A flurry of launches for 2018
• Higher FV of S$0.66

Lower Revenue Recognition From Completed Projects

Roxy-Pacific’s 4Q17 revenue dropped 53% YoY to S$43.32m, while PATMI dipped 39% YoY to S$7.3m. In 4Q17, the group saw lower recognition from Jade Residences, Whitehaven, LIV on Wilkie and an absence of revenue recognition from LIV on Sophia following the completion of these projects in 4Q16 and early 2017. The group’s property investment segment saw revenue drop from $3.3m in 4Q16 to $1.6m in 4Q17, following the sale of 59 Goulburn Street in Oct17.

There was an uptick in revenue for the group’s hotel ownership segment from $11.2m in 4Q16 to $12.0m in 4Q17, following contribution from the newly acquired hotel in Osaka, Japan. Overall gross margin for the group for 4Q17 was at 28%, compared with 22% in 4Q16.

Good Pipeline of Singapore Residential Projects

Currently, Roxy-Pacific has 10 projects in its Singapore landbank, which should be able to yield a total of 440 units. The group has launched one of them on 28 Jan (The Navian), and has sold about 48% of units by 5 Feb. While management plans to launch six development sites for sale in FY2018, we believe that eight launches could be possible, leaving 15, 17 & 19 Lorong Kismis and 22 Farrer Road for FY19.

In our opinion, with these 10 sites on its books, Roxy-Pacific now has the luxury of being more selective in its landbanking activities. Separately, we believe that the softer RevPar seen by Grand Mercure Singapore Roxy hotel over the course of 2017 should witness some reprieve this year, given the more favourable supply-demand dynamics in 2018. The Singapore Tourism Board expects further growth in the tourism sector in 2018, with visitor arrivals forecasted to grow 1% to 4%, with tourism receipts to grow between 1% and 3%.

Notwithstanding the positives as highlighted above, we think that revenue will be lumpy – contribution from the 10 Singapore projects as well as 2 out of 3 Australian development projects is forecasted to be recognized only from FY19. With a change of covering analyst, we fine-tune our assumptions and our fair value rises from S$0.60 to S$0.66.

Source: OCBC Research - 15 Feb 2018