Excerpts from DBS Vickers' report
Analysts: Rachel Tan & Derek Tan
Initiate with BUY; TP of S$0.69. We initiate coverage with a BUY rating and TP of S$0.69 (based on 30% discount to RNAV) for Roxy-Pacific Holdings (Roxy).
Benefitting from being early in the current en-bloc cycle, Roxy is one of the few “undiscovered” midcap developer proxies to ride the recovery of the Singapore property market. BUY!
Where we differ.
Poised to hit an upbeat Singapore property market with seven freehold residential developments. We are the first brokerage to initiate coverage on Roxy. While the market may have overlooked Roxy for its size, we believe “best things come in small packages”.
We believe Roxy, being one of the earliest to landbank in the current market cycle, has seven freehold residential developments in Singapore which will be ready to launch in 2018, three of which will be launched within 1Q18. We see this as a window for the group to capture the rise in buyer demand before its peers.
Potential catalysts: Strong sales take-up, more landbanking, acquisitions of good-quality investment properties.
|Realisation of development projects in Australia upon completion.
Roxy’s investments in development projects in Australia in 2015 will soon pay off when five projects complete by 2018. The projects have all been substantially sold (>95% sold) except the last project launched in 3Q17: Art House at West End Glebe. The units sold have a total sales value of approximately S$300mn and could potentially contribute 21% to 44% of FY18F – FY19F earnings.
-- DBS Vickers
Beefing up its recurring income and diversifying its geographical presence. In FY17, Roxy had acquired four new commercial buildings in Australia / New Zealand and one hotel property in Japan.
Its portfolio of investment properties has grown close to threefold to S$330mn.
These properties will start contributing in FY18, thus raising contributions from investment properties to 35% in FY18F from 20% in FY16.
Valuation: Our TP of S$0.69 is based on 30% discount to RNAV of S$0.98. The stock currently trades at 1.2x FY18F P/BV, below historical average. At its peak, Roxy traded at 2.3x P/BV.
Key Risks to Our View: i) Slower take-up rates, ii) Government regulates more to manage the Singapore property market, iii) AUD / NZD / JPY forex fluctuations, and iv) acquisitions of less desirable investment properties.
Full report here.