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Broker's take: DBS issues 'buy' on Roxy-Pacific Holdings

DBS Group Research on Tuesday issued a "buy" call on property and hospitality group, Roxy-Pacific Holdings with a target price of S$0.69 per share, on the back of strong sales take-up and acquisitions of good-quality investments.

The broker's target price represents a potential upside of 30 per cent from Roxy-Pacific's last traded price of S$0.53 per share on Dec 11.

In its research note, DBS said that Roxy-Pacific is poised to hit an upbeat Singapore property market with seven residential freehold sites worth an estimated gross development value (GDV) of S$0.5 billion launching next year.

"While the market may have overlooked Roxy-Pacific for its size... we believe Roxy-Pacific being one of the earliest to landbank in the current market cycle has seven freehold residential developments in Singapore which will be ready to launch in 2018, three of which will be launched within Q1 FY2018. We see this as a window for the group to capture the rise in buyer demand before its peers," DBS said.

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In addition, the broker noted that Roxy-Pacific has been beefing up its recurring income and extending its geographical presence overseas.

"In FY2017, Roxy-Pacific had acquired four new commercial buildings in Australia/New Zealand and one hotel property in Japan. Its portfolio of investment properties has grown close to threefold to S$330 million."

"These properties will start contributing in FY2018, thus raising contributions from investment properties to 35 per cent in FY2018F from 20 per cent in FY2016," DBS said.

However, the broker added that key risks include: slower take-up rates, increased government regulation to manage the Singapore property market, forex fluctuations and acquisitions of less desirable investment properties.