RESILIENT GROWTH WITH DIVERSITY
Despite economic and geo-political uncertainties, 2019 turned out to be
a rewarding year for Roxy-Pacific. Globally, there were various sources of
volatility, which began to subside in the last quarter of 2019, including the
trade tension between the US and China; and the progress made in the
Brexit negotiation, with its irreversible departure from EU. In Singapore, the
economy expanded by 0.7% for 2019, down from 3.4% in 2018. The property
sector grew at a slower pace, dampened cooling measures implemented
in 2018 with a raise of Additional Buyer’s Stamp Duty and a tightening of
For Roxy-Pacific, our diversity by assets and geographical regions continued
to provide a resilient platform. Apart from significant revenue contributions
from our property developments in Singapore and Sydney, our investment
properties in Australia and New Zealand enjoy high occupancy rates and
provided us with good recurring income. At the same time, we expanded
our recurring income streams during the year through hotel and property
investments overseas, in both Australia and Japan.
For FY2019, we achieved revenue of S$444.0 million, a 234% increase from
S$132.9 million recorded in preceding financial year (“FY2018”), mainly due
to significantly higher revenue from our Property Development segment,
supported by some growth in the Hotel Ownership segment, partially offset
by a marginal decline in revenue from the Property Investment segment.
The Property Development’s 415% revenue growth was mainly driven out
of both Australia and Singapore. In Australia, revenue was recognised for
both The Hensley and West End Residences, upon settlement from the
purchasers in 1Q2019 and 4Q2019. In Singapore, we saw a progressive
revenue recognition from 120 Grange, The Navian and Harbour View Gardens.
This was partially offset by the absence of revenue recognition from Trilive
and Straits Mansions which obtained TOP in June 2018 and October 2018,
The Group’s total attributable pre-sale revenue remained strong at S$471.2
million, with profits from the residential projects to be recognised from
1Q2020 to FY2023.
In terms of Property Investment, contributions were mainly derived from both
Roxy Square in Singapore and NZI Centre in Auckland, New Zealand, which
dipped 3% to S$7.7 million.
During the year, we saw a 58% decrease in share of results of associates
mainly due to the absence of fair value gains of 117 Clarence Street divested
in FY2018, coupled with share of loss from showflat expenses incurred in
FY2019. Other operating income declined 46% to S$7.2 million, mainly due
to a higher fair value gain from NZI Centre as well as higher foreign exchange
gain recorded in FY2018.
Consequently, mainly lifted by the significant topline growth, FY2019 net
profit rose 42% to S$30.3 million in FY2019 from S$21.3 million in FY2018.
Our strategy for sustainable growth remains focused on having a well-balanced
asset portfolio across sectors and geographies. We will continue to
look for opportunities to suitably recycle our capital to enhance shareholder
Our strategy is supported by our strong balance sheet, with cash and bank
balances of S$331.0 million, a comfortable net debt-to-adjusted Net Asset
Value ratio of 0.60 time.
BROADENING OUR PERSPECTIVE
Data from the Urban Redevelopment Authority (“URA”) showed a 0.5%
increase in the private residential property index in 4Q2019, compared to the
1.3% increase in 3Q2019. For the whole of 2019, prices of private residential
properties increased by 2.7%, compared with the 7.9% increase in 20181.
The URA data also showed that for the whole of 2019, developers launched
11,345 uncompleted private residential properties, compared with the 8,769
units in the previous year1.
We successfully launched all remaining six of our properties comprising a
total of 606 units during the year under review including the freehold, prime
developments – RV Altitude, Fyve Derbyshire, Wilshire Residences, Dunearn
386 and NEU AT NOVENA – of between 35 to 140 units; and the 99-year
leasehold development with 188 units including two commercial units, View
at Kismis. These projects are expected to contribute positively to the Group’s
earnings progressively from 1Q2020.
Amidst a challenging property landscape in 2019, we have placed a greater
emphasis on unique concepts and well-designed space for each of our
properties, which are all strategically located and well-connected to key
amenities and public transportation. Our priority will be on the sale and
delivery of these predominantly freehold sites. The Group acquired many
of these sites in the early stage of the property upcycle and received
encouraging response for the projects, which were launched at attractive
Property developers are likely to face further challenges in 2020 due to the
2019 Novel Coronavirus (“COVID-19”) situation. The construction industry has
been impacted beyond labour shortage as the lockdown in several Chinese
cities have resulted in delays for the delivery of construction material and
finished products. As a result of the unforeseen circumstances, property
developers are facing an increasing risk of construction delays and potentially
missing the additional buyer’s stamp duty deadline.
In Australia, the price index for residential properties for the weighted
average of eight capital cities registered a 3.7% decline in the September
quarter 2019 as compared to the September quarter 2018, with all capital
cities except for Hobart recording declines2.
Notwithstanding a weaker market, the Group’s two remaining residential
development projects in Sydney, Australia have sold well. The Octavia Killara
is fully sold10, while the 231-unit West End Residences project, which was
launched in two phases, has obtained the Interim Occupancy Certificate4, and
is currently overall about 97% sold3.
In Malaysia, The Colony by Wisma Infinitum is 81% sold3, 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 53% sold3.
Overall, for Property Development, we will adopt a prudent approach, with a
focus on well-located and unique sites, both locally and abroad.
On the hospitality front, latest statistics from the Singapore Tourism Board
(“STB”) showed a 3.3% year-on-year growth in international visitor arrivals
for 2019 to 19.1 million5, though headwinds are expected in the year
ahead, due to the COVID-19, volatility of the global political and economic
environment, and stiffer regional competition. According to the STB, tourism
arrivals and receipts for 2020 are expected to be impacted by the COVID-19.
The ongoing COVID-19 outbreak has significantly impacted visitor arrivals,
especially from China, which accounts for around 20% of international visitor
arrivals. Based on the current situation, visitor arrivals for 2020 is expected
to fall by about 25% to 30%6.
The Grand Mercure Singapore Roxy hotel remained resilient, buoyed by
stronger tourist arrival numbers in Singapore last year. With a weaker demand
forecast by STB for 2020, we will monitor the situation closely and have
stepped up precautionary measures in the meantime.
Japan’s hospitality sector has also been impacted by the COVID-19 outbreak
with cancellations from mainland Chinese tourists, which make up the largest
group of tourists for the country. According to the Japan National Tourism
Organisation the estimated number of international travelers to Japan for
the year was about 31.9 million, an increase of 2.2% from the previous
corresponding period7. The government has earlier set a target of 40 million
annual visitors by 2020, when Japan will host the Olympics8.
The Group’s self-managed hospitality assets under the Noku hotels hospitality
brand – Noku Kyoto, Noku Osaka and our first upscale resort in Maldives,
Noku Maldives – continue to contribute recurring income. The Group’s second
resort asset in Phuket, Thailand, Noku Phuket, is targeted to launch in 2021.
We have also grown our hospitality presence in Australia with plans for 322-room upscale hotel in Melbourne CBD to open in 2022. This is in line with our
strategic efforts to strengthen and grow our stable recurring income streams.
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
explore collaborations with international hotel operators to manage larger-scale
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 four points
to +3 in 3Q2019. By sector, Office and Industrial sentiment remained the
highest, despite a decline as below average business conditions persisted.
The Group’s investment properties in Australia – namely the office building
at 312 St Kilda Road and the centrally-located industrial building at 33 Argyle
Street, are at 100% occupancy9.
Auckland, New Zealand
Of our two key assets in New Zealand, 205 Queen Street, located in the core
of Auckland’s CBD, enjoyed high occupancy of 88%9 during the year. 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.
During the year, we expanded into Japan’s retail property sector with the
acquisition of a 53.07% stake in a retail building situated at Ginza, which
is widely known as a popular upscale shopping and entertainment district
Subsequent to FY2019, we further expanded our presence in Japan with the
acquisition of a 49% stake in a retail building at Shibuya, one of the most
popular retail districts of Tokyo. As a testament of the Group’s foresight in its
property investments, the Group has also entered into an agreement for the
sale of the retail building situated at Ginza for approximately JPY8.6 billion,
representing a premium of over 43% in less than a year, from the initial
purchase price of JPY6.0 billion.
Overall, as part of our ongoing strategy to grow our investment portfolio
and recurring income regionally, we will continue to be on the acquisition of
well-located and tenanted commercial buildings which will strengthen our
recurring income stream. The Group will also place a strong focus on nurturing
the properties in its investment portfolio and unlocking value by reinvesting
towards potentially higher yielding assets when the opportunity arises.
To reward our loyal shareholders for their continuous support, the Board has
proposed a final cash dividend (one-tier tax exempt) of 1.09 SGD cent. Coupled
with the interim dividend (one-tier tax exempt) of 0.195 SGD cent, this brings
the total distributions for the financial year to 1.285 SGD cent, representing
a dividend payout ratio of 55%.
WORDS OF APPRECIATION
I would like to thank our Board of Directors for their guidance in steering the
Group through the macro volatilities. At this juncture, on behalf of the Board,
I will like to warmly welcome our new Independent Director, Ms. Cecilia
Tan. Ms. Tan, who brings with her strong expertise in fund management,
real estate and retail management, has been appointed as a member of the
Audit Risk Management Committee, Nominating Committee and Remuneration
Committee. On behalf of the Board, I would like to take this opportunity to
express our appreciation to Mr. Tay Kah Poh, our Lead Independent Director, who will be stepping down from the Board at the forthcoming Annual General
Meeting. Mr. Tay has been an invaluable member of our Board for the past
12 years, and his strong commitment and expertise has contributed greatly
to the Group’s success.
I am also deeply appreciative of our senior management team, who has
actively led the Group to overcome challenges and continues to work tirelessly
to meet evolving demands in the 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 ardent support as we remain focused on
broadening our perspective for sustainable growth.
Teo Hong Lim
Executive Chairman and
Chief Executive Officer
5 March 2020