We met with ROXY’s management yesterday. Over 2Q13, ROXY launched three out of four land-bank sites – LIV on Sophia, WhiteHaven and Jade Residences – which are 100%, 71% and 50% sold to date, respectively. Overall, we judge these pace of sales to be fairly strong with selling prices above expectations. In addition, the sold-out launch at LIV on Sophia, located in the same vicinity as ROXY’s final land-bank site (Wilkie Terrace), likely points to positive demand when it is launched ahead.
Successful harvest is a milestone
We see these successful launches to be a key milestone for ROXY given their significant combined size – S$423m and S$95m in estimated total sales and net profits – relative to the group’s project portfolio. ROXY now sits on a whopping S$1,118m of unrecognized progress billings from sold units (up 30% from end FY12), which is 8.1 times total FY12 development revenues and would underpin earnings growth over FY13-16.
Record of sharp execution
Management continues to acquire and launch niche sites expediently with high sell-through rates, while deftly navigating the property cycle. We understand ROXY is now prudently sourcing for more landbank; already it has entered into agreements to acquire Sunnyvale Apts for S$25m and Yi Mei Gardens for S$136m. By our calculations, these two acquisitions would accrete 3.5 S-cents to RNAV.
Upgrade to BUY with increased S$0.74 FV
We update our model with latest datapoints and our fair value increases to S$0.74 (30% RNAV disc.) versus S$0.61 (25% discount) previously. Note that our RNAV discount is raised given increased residential uncertainties from rising mortgage rates. We deem this to reflect a sturdy margin for safety, particularly since a large portion of ROXY’s value comprises Grand Roxy Mercure Hotel (worth S$0.47 per share) and that only 10% of ROXY’s total launched GDV is now left unsold. Upgrade to BUY with a FV of S$0.74 (30% RNAV disc.).
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