Singapore | Real Estate Management & Development

Asia Pacific Equity Research

ROXY-PACIFIC HOLDINGS | BUY

MARKET CAP: USD 465M AVG DAILY TURNOVER: USD 0.1M 28 Jun 2013 Company Update

STRONG SALES AT KEY LAUNCHES UPGRADE TO BUY

Good sales at key launches in 2Q13 Progress billings up 30% to S$1,118m Upgrade to BUY with S$0.74 FV

BUY (upgrade)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast S$0.74 S$0.02 S$0.60 28%

A key quarter for ROXY We met with ROXYs 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 ROXYs 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 groups 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 ROXYs value comprises Grand Roxy Mercure Hotel (worth S$0.47 per share) and that only 10% of ROXYs total launched GDV is now left unsold. Upgrade to BUY with a FV of S$0.74 (30% RNAV disc.).
Key financial highlights Year Ended Dec 31 (S$m) Revenue Cost of sales Gross profit PAT Income tax EPS (S-cents) Cons. EPS (S-cents) PER (x) P/NAV (x) Net gearing (%) FY11 183.7 -120.4 63.3 51.8 -6.7 8.1 na 7.3 1.8 117.8 FY12 190.6 -114.7 75.9 58.3 -7.6 6.1 na 9.7 2.2 140.9 FY13F 381.1 -242.0 139.1 78.0 -10.1 8.2 7.8 7.3 1.8 58.6 FY14F 457.3 -297.3 160.1 95.2 -12.4 10.0 8.8 6.0 1.5 -24.8

Analysts Eli Lee (Lead) +65 6531 9112 elilee@ocbc-research.com Kevin Tan +65 6531 9810 kevintan@ocbc-research.com

Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$578 / USD456 S$0.1 / USD0.1 0.3 0.41 - 0.67 21.7 954.8 SGX ROXY SP RXYP.SI E8Z Financials RE Mngt & Dev Kian Lam Inv 37% 1m -1 7 3m -3 1 12m 46 33

Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr ice (S$) 0.70 0.64 0.57 0.51 0.45 0.39 Jun- 12 Sep- 12
Fair Value

Index Level 4800 4360 3920 ` 3480 3040 2600 Dec- 12

ROXY SP

Mar - 13
FSSTI

Sources: Bloomberg, OIR estimates

Industry-relative metrics
Per centil e 0th Mkt Cap Beta ROE PE PB Company Industr y Aver age 25th 50th 75th 100th

Note: Industry universe defined as companies under identical GICS classification listed in exchanges in Asia Pacific. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MCI (P) 004/06/2013

OCBC Investment Research Singapore Equities

Exhibit 1: Sales and progress billings at launched projects

Project name Total units in project Stake in project Percentage sold Est. unrecognized profit S$m 0.0 1.9 4.9 34.5 54.7 8.2 17.5 46.1 2.9 16.6 18.2 6.0 13.0 44.0 23.7 27.5 319.7 Unrecognized progress billing (sold units only) S$m 0.6 5.7 14.5 125.5 153.2 33.8 78.3 150.4 21.5 52.2 64.5 91.7 48.1 87.4 96.6 92.1 1,118

Unit 1 Haig 162 2 Straits Residences 3 Jupiter 18 4 Space@Kovan 5 Spottiswoode 18 6 Nottinghill Suites 7 Wis@Changi 8 Centropod@Changi 9 Treescape 10 Millage 11 Natura@Hillview 12 Eon Shenton 13 The MKZ 14 Jade Residences 15 Whitehaven 16 LIV on Sophia Total Source: Company, OIR estimates 99 30 53 196 251 124 83 192 30 156 193 253 42 173 173 121 2,169

% 45% 100% 100% 100% 100% 45% 100% 100% 100% 48% 49% 20% 100% 100% 100% 90%

% 100% 97% 100% 100% 100% 100% 100% 100% 100% 100% 100% 92% 100% 50% 71% 100% 90%

Note: Estimated profits and progress bilings are on effective stake basis

Exhibit 2: Land-bank held by Roxy-Pacific

Name Stake in project % 1 Wilkie Terrace 2 Sunnyvale Apt 3 Yi Mei Garden Total Source: Company, OIR estimates Note: Estimated profits are on effective stake basis We have not included Harbor View Gardens as the en-bloc sales process is currently under review. 90% 100% 100% Land area GFA Est. unrecognized profit S$m 34.3 10.4 41.2 86.0 Land cost

sq ft 22,533 23,160 78,030

sq ft 42,587 32,424 163,863

S$m 51.8 25.0 136.0 212.8

OCBC Investment Research Singapore Equities

Exhibit 3: RNAV breakdown As at end 1Q13 (S$m) Dev. prop Singapore Inv. prop Singapore Surpluses Development portfolio Grand Mercure Roxy Adjustments minus: net debt Other net assets Total RNAV Shrout RNAV per share Discount Fair value
Source: OIR

573.9

61.2

365.1 382.1

-448.7 79.1 1,013 955 $1.06 30% $0.74

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year Ended Dec 31 (S$m) Revenue Cost of sales Gross profit Other operating income Admin expenses Other operating expenses Share of assoc/JV profits (post-tax) PBT Income tax PAT

FY11 183.7 -120.4 63.3 24.9 -11.5 -11.7 0.3 58.5 -6.7 51.8

FY12 190.6 -114.7 75.9 17.1 -12.3 -12.3 4.1 65.9 -7.6 58.3

FY13F 381.1 -242.0 139.1 0.0 -24.7 -24.8 9.5 88.1 -10.1 78.0

FY14F 457.3 -297.3 160.1 0.0 -29.6 -29.7 19.5 107.6 -12.4 95.2

Balance sheet As at Dec 31 (S$m) Cash and equivalents Dev. Properties Inv. Properties Total Assets Trade and other payables Current financial liabilities Non-current financial liabilities Total Liabilities Total Equity Total equity and liabilities

FY11 229.4 329.9 44.7 748.6 31.7 396.0 85.7 534.3 214.3 748.6

FY12 254.0 455.8 61.2 924.1 34.7 533.9 77.5 670.4 253.6 924.1

FY13F 467.9 361.5 61.2 1,058.2 73.1 550.0 100.0 747.5 310.5 1,058.2

FY14F 815.3 194.2 61.2 1,218.1 89.8 600.0 120.0 834.2 383.8 1,218.1

Cash flow statement Year Ended 31 Dec (S$m) Profit before income tax Reval and disposal of assets Total change in working capital Cash flow from operations Cash flow from investing Dividends (paid) Cash flow from financing Opening balance Change in cash Ending balance

FY11 58.5 -23.0 -38.7 -2.1 -18.8 -9.5 91.2 157.9 70.3 229.4

FY12 65.9 -15.6 -120.2 -72.4 -9.3 -19.1 106.7 229.4 25.0 254.0

FY13F 88.1 0.0 95.6 173.6 29.2 -21.0 11.1 254.0 213.9 467.9

FY14F 107.6 0.0 169.1 254.5 52.1 -22.0 40.8 467.9 347.5 815.3

KEY RATES & RATIOS EPS (S-cents) NAV per share (S-cents) PER (x) P/NAV (x) Gross profit margin (%) Net profit margin (%) Net gearing (%) Dividend yield (%) ROE (%) ROA (%) Sources: Company, OIR forecasts

FY11 8.1 33.7 7.3 1.8 34.4 28.2 117.8 2.2 24.2 6.9

FY12 6.1 26.6 9.7 2.2 39.8 30.6 140.9 2.7 23.0 6.3

FY13F 8.2 32.5 7.3 1.8 36.5 20.5 58.6 3.7 25.1 7.4

FY14F 10.0 40.2 6.0 1.5 35.0 20.8 -24.8 3.9 24.8 7.8

Company financial highlights

OCBC Investment Research Singapore Equities

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report holds/hold NIL shares in the above security.

DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither given nor endorsed.

RATINGS AND RECOMMENDATIONS: - OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% based on the current price; a HOLD rating indicates total returns within +10% and -5%; a SELL rating indicates total returns less than -5%.

Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

Important disclosures