Compiled by Rachel Mui
ROXY-PACIFIC HOLDINGS | HOLD
DEC 21 CLOSE: $0.40
TARGET PRICE: $0.39
DBS Group Research, Dec 14
Roxy's unrecognised sales stood at $600 million as at end Q3.
This is expected to drive earnings in the next three to four years. Singapore projects comprise 33 per cent of the unrecognised sales, largely from sales achieved from projects launched in FY18, while Australia projects comprise 58 per cent.
In Singapore, Roxy successfully launched five residential projects in FY18, of which three projects were launched before the authorities implemented new cooling measures. These projects have achieved sales ranging from 77 per cent to 98 per cent.
As the landbank were acquired early, these projects sit on commendable margins at more than 15 per cent.
Additionally, the group is building recurring income through the acquisition of investment properties in Australia and New Zealand.
After divesting 117 Clarence St for almost double its acquisition price in 2016, Roxy reinvested in three commercial buildings for $117 million. The properties are estimated to yield about 5 per cent in Australia and 6 per cent in New Zealand.
Roxy also has pipeline projects of 600 units which are slated for launch in FY19.
We upgrade our rating on Roxy to "hold" from "fully valued" and nudge down our target price (TP) to 39 cents from 40 cents. Despite the attractive valuations, we remain cautious and see limited catalysts for the stock and sector given expectations of a property market slowdown.
SMALL AND MID-CAPS | NEUTRAL
RHB Research Institute, Dec 14
Markets have been impacted by a challenging 2018, especially on the tech and property-related fronts as they have corrected significantly.
We believe the outlook of these two sectors and market sentiment depend on the outcome of the US-China trade talks. If the situation worsens, a further correction is likely. Our top picks for the next year are HRnetGroup and Silverlake.
We believe HRnetGroup will likely make more acquisitions in the near future, and focus on new markets while growing its presence in North Asia.
We also expect a better FY19, on stronger growth in North Asia and Singapore. In addition, management is likely to continue its share buyback scheme to reward productive sales employees, and for further acquisitions.
We maintain "buy" on HRnetGroup with a TP of $1.18.
Separately, Silverlake reported a stellar Q1 2019, with revenue surging 36 per cent year on year to RM166.6 million (S$54.6 million) due to the implementation of contracts secured few months ago. The next few quarters should likely be stronger. Earnings from the acquisition of X Infotech will also kick in H2 2019.
With a stellar year ahead, we maintain "buy" with a TP of 65 cents, accompanied by an attractive 5.5 per cent dividend FY19F yield.
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