SINGAPORE (Feb 19): OCBC Investment Research is maintaining its “buy” call on Roxy-Pacific Holdings with a higher fair value estimate of 66 cents from 60 cents previously, with a change of the stock’s covering analyst and the fine-tuning of assumptions following the developer’s recent announcement of its 4Q17 results.

In a report last Friday, lead analyst Joseph Ng says he remains positive on the stock despite the latest quarter’s earnings decline.

This is given the group’s good pipeline of residential projects in Singapore which Ng describes as a “flurry of launches” in 2018. Despite the management’s guidance for the launch of six projects for sale in FY2018, Ng believes eight launches could be possible instead – leaving three units along Lorong Kismis (15, 17 and 19) and 22 Farrer Road for FY19.

“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, and has sold about 48% of units by 5 Feb,” notes Ng.

“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 revenue per available room (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,” he adds.

Further, Ng highlights the Singapore Tourism Board’s (STB) optimistic growth outlook for the tourism sector this year, with visitor arrivals forecasted to grow 1-4% and tourism receipts to grow between 1-3%.

“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 recognised only from FY19,” concludes the analyst.

This story, written by Michelle Zhu for The Edge Singapore, first appeared on Feb 19.