Roxy-Pacific Holdings has publicised its response to questions from the Securities Investors Association of Singapore ahead of Roxy's AGM. Excerpts below. For the entire Q&A, click here.
|Executive chairman Teo Hong Lim.As noted in the Chairman’s statement, the Group has taken a conservative approach and re-aligned its businesses in view of the pandemic that sent economies around the world into a tailspin. The Group reported a new loss attributable to equity holders of $29.5 million in FY2020 (FY2019: net profit of $30.3 million), largely due to impairment charges on its hotel properties and properties held by its overseas associated companies.
Despite the pandemic, the Group executed on its development strategy, acquiring a freehold residential site at Jalan Molek and Guillemard Road and another site at Institution Hill.
|(i) Can management share the reasons for its confidence in the small-mid sized freehold redevelopment projects that the Group has acquired since the pandemic?
- We remain prudent in our land acquisition strategy, focusing on small-mid sized freehold developments which we believe will have a stable demand in the long term, given the scarcity of freehold sites in Singapore;
- It is noteworthy that of our ten developments that have been launched in Singapore, seven projects have been substantially sold to date and it’s timely to be on the lookout to replenish our landbank;
- Additionally, with a low net gearing of 0.64 time, we have the headroom to prudently seek out quality and unique projects that are well-located. This is in line with our acquisition strategy both locally and abroad.
|From February 2020 to February 2021, the Group sold about 21 units at RV Altitude (valued at $34 million), 27 units at Fyve Derbyshire ($47 million) and 4 units at Wilshire Residences ($2.2 million). The percentage sold at each project stands at 45%, 72% and 16% respectively.
|(ii) Has management reviewed the reasons for the relatively slow sales progress of certain projects by the Group? Is this an indication that the market has turned more selective and thus the Group might have to restrategise to sell its remaining units?
- Our remaining freehold developments encompass well-designed space and are strategically located, with good connections to key amenities and public transportation; - The ongoing global pandemic ‘overhang’ remains a cause of concern for the market, and we will continue to monitor closely;
- For the Group, since the Phase 3 re-opening in Singapore, our showrooms have stepped up engagement with buyers through physical and online marketing channels including virtual showrooms to showcase the apartment units. Through innovative marketing campaigns, we aim to maximise exposure and reach potential buyers via social media, and by providing immersive experiences with videos and virtual show suites. We will continue to explore a sensitive pricing strategy that’s aligned to existing units and positioning, to match buyers’ needs;
- With unique projects that are well-located, supported by active marketing strategies, we believe that these remaining projects will resonate well with homebuyers.
|In the property investment segment, the Group had a profitable “flip” of a retail building situated in Ginza, Tokyo. Within a year of acquisition, the Group sold the asset for approximately JPY8.6 billion, which was a premium of over 43% in less than a year, from the initial purchase price of JPY6.0 billion.
|(iii) Can management help shareholders understand how it was able to spot such a bargain in the market? What was the Group’s value-add, if any, to the property?
- We have developed a good network of contacts from our years in Japan. The retail building situated at Ginza is widely known as a popular upscale shopping and entertainment district of Tokyo and we saw the potential to invest in this quality asset in 2019.
As part of our capital recycling strategy, we will continue to identify and unlock the potential in our investments, to pursue other potentially higher-yielding reinvestment opportunities as we seek to achieve rolling returns on our investment.