Specifically, the research house has applied a higher RNAV discount rate of 40% compared to 35% previously, as well as accounted for a higher 3Q net gearing of 145.6% as opposed to 139.6% a quarter ago.
The result is a lower fair value estimate after accounting for the developer’s increased net gearing, coupled with OCBC’s cautious outlook on FY19 residential prices.
In a Thursday report, OCBC analyst Joseph Ng says Roxy has turned more cautious with its launches for FY18 following property cooling measures as announced by the Singapore government in July as the developer has cut down from its eight projected launches to just five.
Based on his observations, Roxy currently has about seven projects yielding 702 units in its Singapore development land bank – of which it plans to launch one site for sale in 4Q this year, and another three sites in 1Q19.
“While Roxy’s share price has corrected ~13.2% on a total return basis since we downgraded the stock, we think it might still be too early to call the bottom. Apart from the lack of a re-rating catalyst (that plagues the sector in general), we note that Roxy’s leverage is much higher than that of its peers,” says the analyst.
As at 3.36pm, shares in Roxy are trading flat at 38 cents or 7.1 times FY18F earnings.
