• Roxy-Pacific on 20 September announced a pre-conditional voluntary general offer from TKL & Family for all the issued ordinary shares in the company.
• The offer price of S$0.485 is at a 33.4% discount to adjusted net asset value of S$0.7287/share (as at 30 Jun 21). 31 Dec 20’s ANAV was S$0.7215/share. Currently, the undertaking parties hold 76.44% of the total number of issued shares.

Emerging From the Trough

• Roxy-Pacific (SGX:E8Z) posted 19.6% y-o-y increase in revenue to S$141.2m in 1HFY21, from S$118.1m a year ago. This was largely due to higher revenue from property development (+27.4%), offset by lower revenue from hotel ownership (-29.2%). Property investment segment increased slightly (+8.5%). Roxy-Pacific's 1HFY21 PATMI was S$5.9m, doubled from S$2.8m a year ago.

Property Development

• Roxy-Pacific has 2 upcoming development projects with a forecasted gross development value of S$224.1m. We believe that with the firm prices of residential homes, along with Roxy-Pacific’s unbooked contracted sales, toplines will be firm for the Group. As at 30 June 2021, based on units sold from ongoing development projects, the Group had total attributable pre-sale revenue of S$564.4m.
• High construction costs and delays continue to pose as headwinds and squeeze property developers’ margins. The manpower supply crunch may have slowly been easing but we see that the backlogs and delays are still ahead of the rate of manpower intake. The recent uptick in cases in foreign workers’ dormitories also pose as a risk.

Hotel Ownership

• Grand Mercure Singapore Roxy hotel is a major asset of Roxy-Pacific. In price tag for numerous COVID-19 tests in exchange to not to serve quarantine. We expect tourism to remain weak for the rest of 2021 and hotel owners to continue to be hit by border control measures in the tourism industry.

Property Investment

• Property investment made up the remaining 2.8% of Roxy-Pacific's revenue and comprises rental income from shop units in Roxy Square and NZI Centre. Occupancy ratios as at 30 June 2021 (based on lettable area) were 82% and 100% respectively.

Relative Peer Comparables

• The offer price of S$0.485 per Roxy-Pacific share is at a 33.4% discount to its adjusted net asset unutilized bank facilities. In addition, it has a pipeline of residential launches. However, it trades at a smaller 15.0% discount to RNAV, the lower end of the average of 42.6% discount.

Source: SAC Capital Research - 22 Sep 2021