Roxy-Pacific Holdings likely to launch Kuala Lumpur development by end-2014

Based on research firm's timeline estimates.

OCBC Investment Research said that the Roxy-Pacific Holdings' newly acquired Kuala Lumpur site near the upcoming Quill City should launch by end-2014 and will probably feature a 90:10 mix of residential and retail components.

Here's more from OCBC:

Acquiring 47% stake in KL site. ROXY announced that it has acquired, for RM470k, a 47% stake in Macly Equity Sdn Bhd (Macly) which owns a 70k sq ft land site in Kuala Lumpur, Malaysia at Jalan Dewan Sultan Sulaiman. We understand this land site was acquired for RM89.8m by Macly and that ROXY is finalizing a JV agreement whereby it would likely fund the remaining commitment via a shareholder loan with the site valued at cost. This site has a total GFA of 686k sq ft and is strategically located beside the upcoming Quill City (a 7-acre mixed development on Jalan Sultan Ismail), the Sheraton Imperial Hotel and monorail Stations to Bukit Bintang.

Likely to be launched by end 2014. The site has already received a development order and would likely be developed into a project with a 90:10 mix of residential and retail components. We see the project launching for sale by end 2014 with a targeted TOP of 2019. In addition, we forecast a breakeven ASP in the range of RM800-RM850 psf, and selling ASPs of RM1,100 psf and RM2,200 psf for the residential and retail components,
respectively. This being so, this acquisition would likely accrete 2.4 S-cents to ROXY’s RNAV.

First acqusition in Malaysia. This is ROXY’s first acquisition in Kuala Lumpur, Malaysia and we like the group’s approach of selecting a site with strong potential while working with a local partner. The site is located near the upcoming 6-storey Quill City Mall which is slated to open in time for Hari Raya next year and is reportedly already 50% pre-leased.

Maintain BUY with higher S$0.76 fair value. Maintain BUY with a higher fair value of S$0.76 (30% RNAV disc.) from this acquisition, versus S$0.74 previously. We see the stock as a compelling risk-reward proposition currently as the group now sits on a whopping S$1,118m of unrecognized development revenue from sold units and enjoys significant diversification from its hotel segment (Grand Roxy Mercure Hotel worth S$0.47 per share).

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