Chairman's Statement

On behalf of the Board of Directors of Roxy-Pacific, it is my pleasure to present to you the Annual Report for the full year ended December 31, 2018 (“FY2018”).


FY2018 has been a challenging yet fulfilling year for Roxy-Pacific. Globally, there were various sources of volatility, including the escalation of trade tension between the US and China, the continuous interest rate hike by the US Federal Reserve, as well as the lack of progress in the Brexit negotiation. These translated to an arduous macro environment for all businesses. In Singapore, the economy expanded by 3.2% for 2018, down from 3.6% in 2017. The property sector was dampened as a result of cooling measures with a raise of Additional Buyer’s Stamp Duty and a tightening of Loan-to-Value limits to align price increments with economic fundamentals.

For Roxy-Pacific, it represented a year of broad-based focus, one in which we continued to spread our risks with the redeployment of sales proceeds to high yielding investments in both Australia and New Zealand; and harvesting the fruits from our broadened recurring income streams through hotel and property investments overseas. At the same time, we continued to assess and consolidate our position in the property segment in Singapore. Notably, we had replenished our sites relatively early into the cycle and before the en bloc fever, at very reasonable prices, allowing us to attain some pricing power.


For FY2018, we achieved revenue of S$132.9 million, a 46% decrease from S$246.8 million recorded in preceding financial year (“FY2017”), mainly due to lower revenue from our Property Development and Property Investment segments, partially offset by an 13% growth in the Hotel Ownership segment, lifted by higher contributions from self-managed hotels, Noku Osaka and Noku Maldives.

The Property Development revenue dip was mainly due to lower recognition upon the Temporary Occupation Permits (“TOP”) obtained for Trilive in June 2018; and the completion of other projects in 2017. The decrease in revenue was partially mitigated by higher revenue recognised from The Navian and Straits Mansions.

It is noteworthy that although our Property Development projects in Australia had made good progress on sales and construction, revenue from these projects can only be recognised upon full collection of sales proceeds, unlike projects in Singapore and Malaysia that record revenue progressively.

Subsequent to year-end, in January 2019, we reaped good returns from our Australian residential project, which recognised revenue and profit upon full collection of sales proceeds. Based on collection status as of end January 2019, The Hensley, which obtained its TOP in December 2018, contributed S$55.2 million and S$6.6 million to revenue and profit respectively. We expect to further recognise the profits from West End Residences and Octavia in the financial year ended December 31, 2019 (“FY2019”).

The Group’s total attributable pre-sale revenue remained strong at S$630.9 million, with profits from the residential projects to be recognised from 1Q2019 to FY2022.

In terms of Property Investment, the 27% lower revenue was due to the successful divestment of 59 Goulburn Street in FY2017. During the year, we also successfully divested our 50%-owned 117 Clarence Street. We are pleased to have made good progress in the recycling of funds from the successful divestments of both 59 Goulburn Street and 117 Clarence Street into other yield-accretive property investments in both Australia and New Zealand.

During the year, we saw a 60% decrease in other operating income to S$13.2 million from S$32.8 million in FY2017, mainly due to the absence of fair value gain on investment property recorded for 59 Goulburn Street in Australia.

Consequently, mainly due to the lower revenue coupled with decreased other operating income, FY2018 net profit decreased 33% to S$21.3 million in FY2018 from S$31.7 million in FY2017.

We will continue to look for opportunities to suitably recycle our capital for enhancement of shareholder value. We will continually seek an optimal mix between our three segments – Property Development, Property Investment and Hotel Ownership – and balance our assets portfolio both geographically and across sectors for sustainable growth.

Our strategy is supported by our strong balance sheet, with cash and bank balances of S$291.6 million, a comfortable net debt-to-adjusted Net Asset Value ratio of 0.77 time notwithstanding the completion of acquisitions of six development sites in Singapore and three commercial properties in Australia in FY2018. We have good headroom from our S$500 million Multicurrency Debt Issuance programme, of which we’ve fully redeemed the S$60 million that was issued earlier, and this has improve our gearing levels.



Latest real estate statistics from the Urban Redevelopment Authority (“URA”) showed that prices of private residential properties decreased by 0.1% in 4Q2018, compared with the 0.5% increase in the previous quarter. For the whole of 2018, prices of private residential properties increased by 7.9%, compared with the 1.1% increase in 20171.

The URA data also showed that developers sold 8,795 units last year, a 16.8% decrease compared to 10,566 units sold in 2017. The number of units sold also outweighs the 6,020 units launched in 20171.

We’ve replenished our sites progressively over two years mainly in 2017, relatively early into the cycle, and ahead of the en bloc fever, at very reasonable prices. This has proven to be a prudent move and we were able to tap the opportunities presented by the buoyant property market in 2018, before the cooling measures kicked-in in July 2018.

We successfully launched a total of five properties comprising of 293 units during the year under review including The Navian, Harbour View Gardens, 120 Grange, Bukit 828 and Arena Residences. These projects are expected to contribute positively to the Group’s earnings progressively from 1Q2019.

As for property acquisitions, we adopted a prudent stance and were selective in accumulating sites, which comprised mainly freehold development sites, which we see as a rare attribute in land-scarce Singapore. These six sites are the freehold 20-storey residential site, NEU At Novena at 27 Moulmein Rise, 386 to 392 (even no) Dunearn Road, 2 and 6 Guillemard Lane, Wilshire at Farrer Road and Derby Court at Derbyshire Road; and the leasehold residential Kismis sites in the prime Upper Bukit Timah estates.

Subsequent to year-end, we launched two freehold developments in the prime districts. Our developments, RV Altitude and Fyve Derbyshire, were amongst the first projects to be launched in January 2019. We will continue to closely monitor market conditions for our planned upcoming four property launches in 2019, comprising of mainly freehold developments in prime districts.

Our priority will be to successfully sell and deliver the units from our current land bank, as we adopt a ‘wait-and-see’ approach to selectively replenish our land bank, with a greater focus on unique development sites, ensuring sustainable long-term growth for the Company.


For the Australian residential sector, the price index for residential properties for the weighted average of eight capital cities fell 1.5% in the September quarter 2018 and was down 1.9% through the year to the September quarter 2018. On a year-on-year basis, Sydney registered declines of 4.4%2.

Notwithstanding a slower market, the Group’s residential development projects in Australia have sold well. The Hensley residential development in Sydney obtained its TOP in December 2018 and subsequent to year-end, we’ve seen profit recognition in January 2019 from this highly well-received project. The Octavia in Sydney is only left with one unit for sale, while the West End Residences project that was launched in two phases is currently overall close to 88% sold.

We have made our maiden entry into the industrial space with the acquisition of the Mavis Street property in Revesby in New South Wales. The land is slated for a project comprising industrial and storage units for sale.


In Malaysia, The Colony by Wisma Infinitum is over 72% sold as at February 12, 2019, having found a niche in the form of compact dual key configurations that are efficiently designed. Phase Two of our Malaysian freehold JV project, The Luxe by Wisma Infinitum, which is strategically located in the Kuala Lumpur City Centre and is positioned higher than The Colony to target a different market segment, is over 42% sold as of February 12, 2019.

Overall, for Property Development, having accumulated some land banks during the year, for FY2019, we will be consolidating our position both locally and abroad, to firstly execute well on the projects-on-hand, before we prudently seek out other unique and yield-accretive opportunities to replenish our land bank.


On the hospitality front, latest statistics from the Singapore Tourism Board (“STB”) showed that Singapore hit a record high in tourist arrivals and spending for the third consecutive year, having received 18.5 million in 2018 as compared to 17.4 million visitors in 2017. Similarly, tourism receipts rose 1.0% to S$27.1 billion, from S$26.8 billion in 20173.

For 2019, the STB expects further growth for the tourism sector, forecasting visitor arrivals to grow 1% to 4% to be in the range of 18.7 million to 19.2 million, while tourism receipts are expected to be in the range of S$27.3 to S$27.9 billion, a growth of between 1% and 3%3.

The Grand Mercure Singapore Roxy hotel remained resilient during the year under review, buoyed by stronger tourist arrival numbers in Singapore last year. With a stronger demand forecast by STB, and a muted supply increase in hotel rooms in 2019, we are optimistic that Grand Mercure Singapore Roxy hotel will maintain its performance in the coming year.

The hospitality outlook in Japan shows positive signs as well. According to the Tourism Minister of Japan, the estimated number of overseas visitors to Japan reached a record high of 31.19 million in 2018, up 8.7% from the previous year and rising for the seventh straight year. The government has set a target of 40 million annual visitors by 2020, when Japan will host the Olympics4.

Our first self-managed hotel asset, Noku Kyoto, officially opened over three years ago in November 2015, recorded healthy AOR, ARR and RevPAR during the year under review. Noku Kyoto has enjoyed high ARR; with its favourable location and its unique value proposition through curated tours and personalised services. Given the warm response that we have received since opening and given Kyoto’s thriving tourism prospects, we remain optimistic of its performance in the coming year.

Our self-managed, 154-room upscale boutique hotel which we acquired in October 2017 and subsequently rebranded in January 2018 to Noku Osaka, has had a good performance in its first year of operation. Notwithstanding adverse weather conditions in the August/September period in 2018 and some renovation and upgrading works during the year, given Noku Osaka’s ideal location near tourist hotspots, the hotel continued to enjoy high occupancy. Noku Osaka is expected to continue to ride on this city’s bright tourism prospects and its strong standing as Japan’s second largest metropolitan city after Tokyo.

The self-managed Noku hotels hospitality brand has most recently been extended to the Kudafunafaru island at Noonu Atoll, Maldives. The upscale resort, which consists of 50 villas, fully opened in August 2018.

In line with our intention to hone our hotel management capabilities and strengthen our recurring income streams, we also intend to launch our Noku-branded 91-room resort in Phuket, Thailand, by 2020.

With a geographically-diversified portfolio, we hope to progressively build a sustainable stream of recurring income for the Hotel Ownership segment. While we intend to self-manage hotel assets where possible, we will also consider collaborating with international hotel operators in managing larger-scale city hotels. For Grand Mercure Roxy Hotel in Singapore, it is self-managed under franchise agreement with Accor Group.

Going forward, we will work towards the launch of our pipeline hospitality assets to strengthen our recurring income and deepen our presence in existing markets and new geographical markets to build up our yield-accretive hospitality asset base.


For the Australian office sector, the overall sentiment in commercial property markets, as measured by the NAB Commercial Property Index, fell 4 points to a 2-year low of 8 in 3Q2018, but is still well above long-term average levels of 3 points5.

During the year, we have effectively redeployed the proceeds from the recent, successful sales of two assets in Sydney – 117 Clarence Street and 59 Goulburn Street into other high yielding investments that generate good recurring income in both Australia and New Zealand.

In New South Wales, Australia, in addition to the purchase of the industrial building, we recently acquired a centrally-located property at 33 Argyle Street, Parramatta, within the central business district as part of our strategy to continue to grow our investment portfolio and recurring income in this country. This 40%-owned commercial building has a net lettable area of 5,281 sq m.

We have also obtained approval to re-develop the freehold commercial and retail building Melbourne House, located in the prime retail area in the centre of Melbourne’s CBD, into 319 room hotel. This is in line with our strategy to add to our stable of recurring income streams.

This builds upon our earlier acquisition of the 6-storey office building located at 312 St Kilda Road, minutes from Melbourne’s CBD. This 45%-owned property enjoys a high occupancy of 89% as at December 31, 2018 and contributes strong recurring rental income to the Group.

Auckland, New Zealand

With our in-house management expertise, coupled with our property investment experience gained both locally and in overseas markets, we now have two key assets in this country to further broaden our recurring income stream.

Our 50%-owned property comprising two commercial towers at 205 Queen Street, Auckland, New Zealand, enjoyed high occupancy of 85% during the year. Situated in the core of Auckland’s CBD, this property presents a prime investment opportunity for us and has the potential to be a stable source of rental income for the Group. We will look for opportunities to raise occupancy to maximise rental yield.

Additionally, our wholly-owned building, NZI Centre, situated in the western end of Auckland’s CBD, is fully leased to a well-known tenant – IAG New Zealand Limited – the largest insurer in New Zealand.

Overall, our strategy for this segment will continue to be on the acquisition of well-located and tenanted commercial buildings which will strengthen our recurring income stream.


To reward our loyal shareholders for their continuous support, the Board has proposed a final cash dividend (one-tier tax exempt) of 0.705 SGD cents. Coupled with the interim dividend (one-tier tax exempt) of 0.195 SGD cents, this brings the total distributions for the financial year to 0.900 SGD cent, representing a dividend payout ratio of 55%.


I would like to thank our Board of Directors for their guidance and counsel in the last financial year, with special words of appreciation to both Mr Tong Din Eu, who was appointed as Chairman of the Audit Risk Management Committee with effect from 16 October 2018 and Mr Tay Kah Poh, who was appointed as the Lead Independent Director on 1 June 2018. I am also deeply appreciative of our senior management team, who have stepped up effectively to their new roles as we continually review and streamline the Group’s operations to meet ongoing changes and demands in the property industry.

In closing, I would like to thank our management and staff for their dedication and contributions to Roxy-Pacific. Last but not least, I would like to extend our appreciation to our shareholders, clients, consultants, suppliers, partners and business associates for their strong support as we stay focused on driving growth and value together.


Teo Hong Lim
Executive Chairman
and Chief Executive Officer


1 Urban Redevelopment Authority, January 25, 2019 – Release of 4th Quarter 2018 real estate statistics
2 Australian Bureau of Statistics, September 2018 – Residential Property Price Indexes: Eight Capital Cities
3 STB, 13 Feb 2019 – Third consecutive year of growth for Singapore tourism sector in 2018
4 The Japan Times, Jan 11, 2019 – Tourists to Japan hit record 31 million in 2018, helped by easier visas for visitors from India, Russia and others
5 Australia National Bank, 22 October 2018 – NAB Quarterly Australian Commercial Property Survey Q3 2018