SINGAPORE (Aug 1): DBS Group Research is keeping its “fully valued” rating on Roxy-Pacific Holdings with an unchanged target price of 40 cents. Based on a 55% discount to RNAV, this implies a 9% downside from Roxy’s closing price of 44 cents on Tuesday.
“We believe the surprise move by the authorities in hiking ABSD rates and tightening mortgages (just over a year after the authorities relaxed the policy measures) will hit buyer sentiment significantly,” says lead analyst Rachel Tan in a Wednesday report.
The report comes after Roxy on Tuesday reported a 57% fall in 2Q18 earnings to $6.4 million on the back of lower property development revenue.
Revenue from the property development segment, which accounted for some 61% of group turnover, fell 65% to $22.4 million in 2Q18.
This was largely due to lower revenue recognition from Trilive, which received its TOP in June 2018, and absence of revenue recognition from Jade Residences, Whitehaven and LIV on Wilkie following the completion of these projects last year.
See: Roxy-Pacific posts 57% drop in 2Q earnings to $6.4 mil on lower property development revenue
“Despite the strong sales take-up rates of its property launches thus far, we believe the change in buyer sentiment would still have an impact Roxy’s new property launches,” Tan says.
However, the analyst believes Roxy, which is smaller and more nimble, could still benefit.
“While Roxy’s sites are typically smaller in size and reducing its risks compared to the larger sites, Roxy still has quite a few projects to be launched in 2H18/2019 which could still be impacted by slower sales volume and buyer sentiment,” says Tan. “Being nimble in times like this is a plus.”
As at 11.19am, shares of Roxy-Pacific are trading half a cent higher at 44.5 cents, implying an estimated price-to-earnings ratio of 14.2 times and a dividend yield of 1.8% for FY18.
