Roxy Pacific

Roxy Pacific: 1Q14 net profit came in at $15m, + 27% YoY due to stronger contributions from its core property development segment, in line with OCBC 's estimates. The house expects FY14 to be a mostly back-loaded year with No. 8 Russell Street’s contributions rolling in over 4Q. 1Q14 revenue increased 48% YoY to $79.5m again due to higher progressive recognition from property developments, primarily Space@Kovan and the MKZ. Performance at the group’s key hotel asset, Grand Mercure Roxy Hotel, remained firm; average occupancy rate increased to 90.2% in 1Q14 from 79.2% in 1Q13, while average room rates dipped 3% YoY to $190.5. While the group’s core development business will likely face continued headwinds from an uncertain domestic residential outlook, OCBC likes management’s strategy of growing recurring income and diversifying its portfolio geographically. Maintain HOLD with TP $0.61.