Chairman's Statement

On behalf of the Board of Directors, it is my great pleasure to present to you the Annual Report for the full year ended December 31, 2016 (“FY2016”).

Opportunities Amidst Uncertainties

It has been a volatile year filled with many uncertainties brought about by major macro-economic and political events, and a challenging one for many industry players with the sustained slowdown in the local property market and expectations for economic growth to decelerate.

In view of the challenging operating environment, we have taken proactive steps over the last few years to rebalance our business mix and property portfolio to ensure resilience and long-term sustainable growth. Some measures we have taken include geographical diversification of our portfolio to markets with favourable property cycles, such as Australia, and the strengthening of our recurring income streams through our hospitality pillar and property investments to complement our core development business.

For FY2016, we achieved revenue of $385.4 million, a 16% decrease from $460.9 million recorded in preceding financial year (“FY2015”), mainly due to the absence of Property Development revenue recognised on completion of Centropod@Changi in FY2015.

Notably, this was partially offset by higher revenue from our recurring income streams in the Hotel Ownership and Property Investment segments, demonstrating the effectiveness of our rebalancing strategy. The decrease in revenue was also mitigated by progressive revenue recognised from Trilive, Sunnyvale, LIV on Wilkie and LIV on Sophia projects in FY2016.

We also saw an 86% increase in other operating income in FY2016 to S$23.0 million from S$12.3 million in FY2015, lifted by higher net fair value gains on investment property in Australia and higher interest income from fixed deposits.

Due mainly to lower revenue coupled with higher expenses relating to sales launches this year – including Straits Mansions in Singapore as well as Octavia and The Hensley in Australia – FY2016 net profit decreased 41% to S$49.8 million from S$85.1 million in FY2015.

Notwithstanding the challenges in our local property market, we are pleased to report that Straits Mansions has since been fully sold, the profits of which will be progressively recognised from 4Q2017. The Hensley and Octavia have also received warm reception from the market and are currently over 90% sold, profits will be recognised upon completion of the projects in 2018.

The success of these projects are a testament of our ability to identify and execute projects that resonate well with buyers and investors at the right time. Identifying an opportunity to replenish our land bank while prices are subdued, we have been accumulating sites in Singapore that presents good yield potential, while executing project launches and developments in Australia in FY2016.

As with the nature of the business, our rebalancing strategy requires some gestation time, and we are pleased to have started seeing results. We will continue to seek an optimal mix between our three segments – Property Development, Property Investment and Hotel Ownership – and balance our asset portfolio both geographically and across sectors for sustainable growth.

Our strategy is supported by our strong balance sheet, with cash and cash equivalents of S$237.3 million, low net debt-to-ANAV gearing ratio of 0.53 time and good headroom from our S$500 million Multicurrency Debt Issuance programme, of which S$60 million has been issued to date. This allows us the financial flexibility to ‘strike when the iron is hot’, capitalising on attractive opportunities as they come by.

Property Development

Latest statistics from the Urban Redevelopment Authority (“URA”)1 showed that private residential property prices in 2016 declined at a gentler rate of 3.1% compared to 3.7% in 2015, marking the slowest rate of decline in three years2. Prices in 4Q 2016 declined 0.5% compared to the 1.5% decline in the preceding quarter, amidst expectations of prices bottoming in 2017.

Coupled with returning demand – developers sold 7.2% more units in 2016 at 7,972 units, compared to 7,440 units in 2015 – the property market appears to be stabilising despite the authorities reaffirming that the cooling measures will not be lifted any time soon3.

Including the aforementioned projects – Straits Mansions, The Hensley and Octavia – we have locked in total attributable pre-sale revenue of S$369.3 million as at February 16, 2017, the profits of which will be progressively recognised from 1Q2017 to FY2020. We also intend to launch a total of 726 residential units – both in Singapore and abroad – for sale in 2017 and 2018.

In line with our strategy to acquire well-located, freehold properties that offer strong and unique selling propositions, we have replenished our Singapore land bank during the year under review with the purchase of freehold residential sites at Jalan Eunos, Pasir Panjang Road (formerly known as Harbour View Gardens), and 120 Grange Road.

We intend to develop the 2,315 square metres (“sqm”) site at Jalan Eunos into 48 residential units; the 2,856 sqm site at Pasir Panjang Road into 57 residential units, and the 1,466 sqm site at 120 Grange Road into 56 residential units. We will continue to monitor the market closely and launch these projects progressively in FY2017 and FY2018 at an opportune time.

For Australia, the Australian Bureau of Statistics reported a 3.5% year-on-year increase in the weighted average residential property prices of eight capital cities, and 1.5% quarter-on-quarter growth for the quarter ended September 2016. On a year-on-year basis, prices rose in Sydney (3.2%), Melbourne (6.9%), Brisbane (3.1%), Adelaide (3.2%), Hobart (6.8%) and Canberra (5.5%) and declined 4% in Perth and 7.2% in Darwin4.

Apart from Octavia and The Hensley in Sydney, launched in March and June 2016 respectively, we’ve also in January 2016 launched the first phase of our 40%-owned luxury condominium project in Brisbane, New World Towers for sale. Phase One, consisting 195 of the total 435 units, has received healthy reception and is 61% sold as at 16 February 2017.

Our freehold 7,125 sqm site in Glebe, Australia, will consist of 231 residential units, and we intend to launch the project for sale in March 2017.

We also look forward to the impending launch of the second phase of our Malaysian JV project, The Luxe by Wisma Infinitum in 2017. The freehold project is strategically located in the Kuala Lumpur City Centre, and its first phase, The Colony by Wisma Infinitum that comprises 423 residential units, is close to 70% sold as at 16 February 2017, having found a niche in the form of compact dual key configurations that are efficiently designed. Phase two, The Luxe, has 300 residential units and will be positioned higher than The Colony to target a different market segment, while bearing in mind the market’s appetite for high-end developments.

Additionally, subsequent to the financial year-end, we acquired five freehold adjoining two-storey shophouses at Upper Bukit Timah Road with an estimated total land area of 953 sqm and an 80%-stake in freehold properties along Upper Bukit Timah Road. We intend to re-develop the shophouses into 34 residential apartment units.

Subsequent to year end, the authorities eased property cooling measures for the first time since 2009 – the Seller’s Stamp Duty has been relaxed while the Total Debt Servicing Ratio has been recalibrated with effect from March 11, 20175. With these favourable developments, we are optimistic on the performance of our impending property launches in the coming year.

Separately, having accumulated experience overseas, especially in Australia, we will continue to work closely with our strategic partners to deepen our footprint in these favourable markets, while we continue to prudently seek yield-accretive opportunities in Singapore to replenish our land bank. We will also focus on project execution in FY2017 and FY2018.

Property Investment

Our strategy for this segment would be to acquire well-located and tenanted commercial buildings which will strengthen our recurring income stream. Our two investment properties in Sydney – 59 Goulburn Street and our 50%-owned 117 Clarence Street – have been contributing strong recurring rental income. Occupancy for both properties remain high at 100% and 98%, respectively.

Subsequent to the financial year-end, we have announced our intention to dispose of the 59 Goulburn Street property should an offer be made at the right price to unlock value and capitalise on favourable market cycles. We have engaged marketing agents for the sale, and will update shareholders when there are material developments.

Hotel Ownership

Latest statistics from the Singapore Tourism Board (“STB”)6 showed a 7.7% year-on-year rise in international visitor arrivals for the whole of 2016, exceeding an earlier forecast of 0-3% growth. Singapore received a total of 16.4 million visitors during the period, compared to the earlier forecast of between 15.1 million and 15.5 million tourists in 2016.

For 2017, the STB is projecting modest growth for the local tourism industry this year, forecasting arrivals of 16.4 million to 16.7 million and tourism spend is expected to come in at between S$25.1 billion and S$25.8 billion, compared to S$24.8 billion in 2015.

The STB7 also reported a 2.3% year-on-year growth in total room revenue to S$3.2 billion for 2016, while Standard Average Occupancy Rate slipped slightly by 0.9% to 84.2%. Revenue per Available Room (“RevPAR”) dipped 4.6% to S$199.1 and Average Room Rate (“ARR”) decreased 3.6% to S$236.6 during the same comparative periods.

The Grand Mercure Roxy Hotel has maintained its resilient performance, reporting healthy average occupancy rate (“AOR”), ARR and RevPAR of 88.5%, S$156.6 and S$138.5 in FY2016 respectively (FY2015: AOR: 89.6%; ARR: S$169.2; RevPAR: S$151.6).

Contrary to Singapore’s subdued tourism outlook, preliminary statistics from the Japan National Tourism Organisation showed a 21.8% surge in visitors in 20168, and a 24.0% growth in visitors in January 20179.

Our first self-managed hotel asset, Noku Kyoto, which was launched in November 2015, recorded AOR, ARR and RevPAR of 52.0%, S$310.5 and S$161.6 in FY2016. Noku Kyoto has enjoyed high ARR since its opening; with its favourable location adjacent to the Kyoto Imperial Palace and connectivity to the Marutamachi train station, coupled with its unique value proposition through curated tours and personalised services, we are optimistic of its performance in the coming year.

We also look forward to the extension of our self-managed Noku Roxy hospitality brand to Maldives in 4Q2017, followed by Chalong Sub-District in Phuket, Thailand, in 2019. Retrofitting works in Maldives resort and redevelopment of Chalong resort are progressing on-schedule.

With a geographically-diversified portfolio, we hope to progressively build a sustainable stream of recurring income for the Hotel Ownership segment. While we intend to self-manage hotel assets where possible, we will also consider collaborating with international hotel operators in managing larger-scale city hotels. For Grand Mercure Roxy Hotel in Singapore, it is self-managed under franchise agreement with Accor Group.

Going forward, we continue to explore opportunities to deepen our presence in existing markets while expanding into new geographies to build up our yield-accretive property and hospitality asset base.

Proposed Dividend & Share Buy-Back

In appreciation of the strong support we have received from its shareholders over the past eight years of our listing, we have proposed a special dividend (one-tier tax exempt) of 0.622 SGD cents. In addition to a proposed final dividend (one-tier tax exempt) of 0.542 SGD cents per ordinary share, this will lift our total dividends for FY2016 to 1.667 SGD cents per share, equivalent to a dividend payout ratio of approximately 40% of our FY2016 net profit.

In addition, since the renewal of our Share Purchase Mandate at the last AGM in 2016, the Group has purchased a total of 1,326,500 shares as at Feb 28, 2017, amounting to 0.1111% of the Group’s total issued share capital base.

Words Of Appreciation

We would like to take this opportunity to thank Mr Teo Hong Wee for his invaluable contributions over the past 25 years of his tenure before he stepped down as Executive Director on 1 January 2017. He will continue to contribute his experience to Roxy-Pacific as Senior Director for development projects.

In closing, I would like to thank our Board of Directors for their guidance and wise counsel in the last financial year, our management and staff for their dedication and contributions to Roxy-Pacific. Last but not least, I would like to extend our appreciation to our shareholders, clients, consultants, suppliers, partners and business associates for their strong support as we look forward to growing alongside all of you as we work towards a sustainable future.


Teo Hong Lim
Executive Chairman
and Chief Executive Officer


1 Urban Redevelopment Authority, January 26, 2017 – Release of 4th Quarter 2016 real estate statistics
2 Straits Times, January 27, 2017 – Things looking up for property market
3 Straits Times, February 22, 2017 – Property curbs ‘to stay for some time’
4 Australian Bureau of Statistics, December 13, 2016 – Residential Property Price Indexes: Eight Capital Cities, Sep 2016
5 Business Times, March 10, 2017 – Quick Takes: Some property measures eased for first time since 2009, more to follow?
6 Singapore Tourism Board, February 14, 2017 – International Visitor Arrivals Statistics
7 Singapore Tourism Board, February 15, 2017 – Hotel Statistics 2016
8 Japan National Tourism Organisation – 2016 Foreign Visitors & Japanese Departures
9 Japan National Tourism Organisation – 2017 Foreign Visitors & Japanese Departures