Spottiswoode 18 is a 36-storey luxury freehold development to be built on the site of the current Dragon Mansion. Launched a few days after the Government announced a new set of measures to cool the market, the project is already 81% sold. Photo: Roxy-Pacific website
ROXY-PACIFIC has not experienced two consecutive months like Dec 2010 and Jan 2011 before.
It launched a property project – Space@Kovan - in December and then in January came a strong set of Government measures to cool down the fever in the property market.
After a few days of preview for potential buyers, Roxy-Pacific went ahead to launch a second more sizeable project - Spottiswoode 18 - during the week after the announcement of the measures.
With strong marketing and reasonable pricing, sales of both projects turned out to be excellent, totalling $327.2 million by Thursday, Feb 17, as reported by Roxy-Pacific in its full-year results announcements two days ago.
This is a significant sum as it will account for 60.6% of the $540 million revenue to be recognized from this quarter all the way to late FY2014. (The $540 million represents all its property sales to date that have not been recognized in its profit & loss statement.)
Space@Kovan is now more than 90% sold.
And Spottiswoode 18 is 81% sold.
For 2010, Roxy-Pacific announced that:
* Its turnover and net profit hit record levels of $216.9 million (up 33% year on year) and $42.8 million (up 53%), respectively.
* It is proposing a final dividend of 1.5 cents a share (1.0 cents in FY09).
* Its Revalued Net Asset Value jumped from 47.33 cents a share as at end-2009 to 66.95 cents a year later – sharply higher than its recent stock price of 45.5 cents.
Revenue from the property development segment was $169 million, making up 77% of the turnover.
The remaining 23% (ie, $47.8 million) of the turnover was contributed by its hotel (Grand Mercure Roxy Hotel, across the road from Parkway Parade) and its property investment segment.
The lion’s share of that 23% - ie, in dollar terms, $44.5 million - came from the hotel.
The remainder of about $3.3 million was made up of rental income from shop units at Kovan Centre and Roxy Square.
For more details, you can read Roxy-Pacific’s announcements at the SGX website.
With $540 million in progress billings to be booked until late 2014, Roxy-Pacific is in a comfortable position.
“That’s not to say we take a rest and don’t look for new land. We can pause a bit but we work hard to find deals that are reasonable,” said Mr Teo Hong Lim, executive chairman of Roxy-Pacific, at a meeting with analysts and fund managers yesterday.
“Our strategy has always been – don’t buy if the profit margin is going to be low.”
As always, what investors would like to know is the road ahead, and Mr Teo gave some clarity on that in response to a question. This and other highlights of the session are as follows:
Q: Roxy has bought quite a few buildings recently. Can you share with us your plans for them?
Mr Teo: Marina House is 60% offices and 40% residences. Singapura Theatre (55, Changi Road) is to be developed for strata-title sale – primarily for retail because it is next to Geylang Serai Market.
116 Changi (Everitt Building), in our judgement, is suitable as an office block but the ground floor may have retail.
As for Toh Tuck, it’s for residential, of course.
So quite a substantial portion of our remaining development properties is commercial.
For investing in commercial property, you can get 80% financing. There is no cap – an aggressive bank could even go to 90-95%.
Q: Can you give a timeline for the launch of those projects?
Mr Teo: For Marina House, it is likely to be at the end of the year – if we can do it earlier, it would be 3Q. We need to top up the lease and have got in-principle approval.
The process for topping up takes time as it has to go through a few departments for assessment of the premium and they need to do a final survey.
The Changi projects – that could be 3Q – and Toh Tuck, 2Q.
Q: What are your thoughts on our gearing level? Do you have a target? And do you have a target for capital deployment for this year?
Mr Teo: This is subjective but vis-a-vis our RNAV, we feel our gearing is low. Most of our gearing is related to projects that are sold, so the debt is covered. We have a lot of liquidity from projects that are already sold. We do have a good capacity to deploy funds into the market.
Back to the sold projects: The debt is covered and there is a profit margin. Banks will lend you a certain percentage of the profit and we are only scratching the surface of that liquidity. And if we want to mobilize that, we can do very big projects -- but we have to look at opportunities.
Q: How much do you think you can comfortably borrow?
Mr Teo: Typically, we can get 80% financing. Our budget for acquisitions is about $300 million.
Q: Are you looking to deploy $300 million?
Mr Koh Seng Geok, executive director: We have the budget for land acquisitions but whether we deploy it or not depends on the opportunities. We have the capacity especially after the successful launch of the Kovan and Spottiswoode projects as these are the two biggest landbank on our balance sheet prior to their launches.
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