NAVIGATING AMIDST VOLATILITIES
The COVID-19 outbreak sent economies around the world into a tailspin,
causing a severe disruption to global economic activity. The impact on
economies across the world has been broad and significant, affecting different
sectors to varying degrees. In Singapore, for the whole of 2020, the economy
contracted by 5.4 per cent, based on the statistics, mainly due to the impact
of COVID-191. Property analysts expect the Urban Redevelopment Authority’s
(URA) benchmark index for overall private home price to post growth ranging
from zero per cent to 4 per cent in 2021.
Whilst 2020 ended on a stronger note with a vaccine being distributed, the
effects of the pandemic are expected to linger on for years. According to the
International Air Transport Association, air traffic volumes are not expected
to return to pre-COVID-19 levels until 20242.
During the year, operationally, we have taken a conservative approach and
re-aligned our businesses, focusing on attaining a lean and nimble business
structure. We will continue to keep our focus on broadening our recurring
income streams and taking a proactive asset management approach for
greater resiliency, as we navigate through the macro volatilities.
Overall, the Group reported net loss attributable to equity holders of S$29.5
million in FY2020, compared to a net profit of S$30.3 million in FY2019. The
net loss was largely due to impairment charges on its hotel properties and
properties held by its overseas associated companies as well as additional
tax expense incurred for its divested investment in Hong Kong amounting
to S$34.6 million for FY2020, which represents 3.7% of the Group’s total
Adjusted Net Asset Value (ANAV) or 1.7% of the Revalued Total Assets.
The impairment charges are non-cash items which do not affect the Group’s
cashflow from operations, which remain strong at S$84.5 million in FY2020.
For FY2020, we recorded revenue of S$198.4 million, a 55% decrease from
S$444.0 million recorded in the preceding financial year (“FY2019”), mainly
due to significantly lower revenue from our Property Development and Hotel
The Property Development segment reported revenue of S$165.8 million in
FY2020, lower from S$385.9 million in FY2019, mainly due to the absence of
revenue recognition from The Hensley and The Navian, as well as West End
Glebe where most of the units’ settlement occurred in 2019.
As at 31 December 2020, the Group’s total attributable pre-sale revenue
stood at S$552.1 million, with profits from the residential projects to be
progressively recognised from 1 January 2021 to FY2023.
In terms of Property Investment, revenue contributions remained relatively
stable at S$7.4 million in FY2020, supported by rental income from both Roxy
Square in Singapore and NZI Centre in Auckland, New Zealand.
Share of results of associates and joint venture fell to a loss of S$6.8 million
in FY2020 compared to a profit of S$8.5 million in FY2019, mainly due to
additional tax expenses for the divested investment in 8 Russell Street,
Hong Kong in 2H2020, and provision of impairment loss on the properties in
our overseas associated companies, although this was partially offset by the
profit from the sale of property at Ginza, Japan in 1H2020.
We will continue to look for opportunities to unlock the potential in our
investments, recycling our capital to prudently pursue potentially higheryielding
reinvestment opportunities as we seek to achieve rolling returns on
We have good headway with cash and bank balances of S$395.6 million and
a comfortable net debt-to-adjusted net asset value ratio of 0.64 time.
DIVERSITY FOR RESILIENCE
Data from the URA showed a 2.1% increase in the private residential property
index in 4Q2020, compared to the 0.8% increase in 3Q2020. For the whole of
2020, prices of private residential properties increased by 2.2%.
For Property Development, in Singapore, we have successfully launched all the
sites in our land bank and will place priority on the sale and delivery of the
remaining 438 units as of 7 February 2021 in both Singapore and Malaysia.
We continue to be highly selective in land acquisition, with a focus on
freehold sites in Singapore. In November 2020, the Group acquired a
freehold residential site at Jalan Molek and Guillemard Road at the purchase
price of S$93,000,000 with a Plot Ratio of 2.8 and we intend to commence
marketing in 2021. Subsequent to the financial year-end, in February 2021, we
announced the acquisition of a 999-year leasehold residential site at 10A and
10B Institution Hill in Singapore, through a joint venture with Macly Capital Pte Ltd and LWH Holdings Pte Ltd, at the purchase price of S$33,600,000 with a Plot Ratio of 2.8. The Group intends to amalgamate the site with another 999-year leasehold site at 11 Institution Hill after it exercises the Option To Purchase issued on 1 February 2021. The amalgamated site will have an estimated total land area of 14,300 sq ft with a total Gross Floor Area of 40,040 sq ft for residential development.
Other key considerations will be well-designed space and strategic locations with good connections to key amenities and public transportation. Meanwhile, with Phase 3 re-opening in Singapore in December 2020, we have stepped up our engagement with buyers through both physical and online marketing channels, including virtual showrooms, to showcase our apartment units.
The current situation remains a cause for concern and we will continue to monitor closely. On a positive note, the Qualifying Certificate (“QC”) rule which was changed in February to allow housing developers to apply for exemption from the QC regime on the basis that they have a substantial connection to Singapore. The Company has obtained an exemption on October 2020 and has applied for QC exemption for the relevant subsidiaries and associate companies. The exemption is currently under review by the authorities. This allows developers like us to avoid penalties from QC due to the slower sales amidst an ongoing uncertain environment.
In Australia, the price index for residential properties for the weighted average of eight capital cities increased by 4.5% in the September quarter 2020 on a year-on-year basis, with rises in all capital cities except Darwin. During the quarter, the key city of Sydney, where the Group has a presence in, registered a gain of 5.4% year-on-year3.
Our two remaining residential development projects in Sydney, Australia, the Octavia Killara and West End Glebe, have been completed and fully sold.
Overall, for Property Development, we will adopt a prudent approach, with a focus on well-located and unique sites, both locally and abroad.
On the hospitality front, latest statistics from the Singapore Tourism Board (“STB”) showed that visitor arrivals fell by 85.7 per cent in 2020 to reach 2.7 million visitors (nearly all from the first two months of 2020), while tourism receipts declined by 78.4 per cent to S$4.4 billion in the first three quarters of 20204. Due to macro headwinds and stiffer regional competition, STB expects tourism arrivals and tourism receipts to remain weak in 2021.
Our flagship Grand Mercure Singapore Roxy hotel joined a large number of hotels in providing their entire accommodation facilities to any person(s) that need to be isolated from the general population in a “Government Quarantine Facility” as a matter of precaution. In 2021, we will continue to sustain key capabilities through technology and upskilling of our staff, to prepare for when the market recovers, once cross-border travel resumes in a significant way.
Japan’s travel bans for travellers from around 152 countries and regions resulted in a significant decrease in international visitor arrivals during the year under review. Noku Osaka, one of the Group’s self-managed boutique hotels, has been closed for operations since November 2020 resulting from this development. On a brighter note, as part of its efforts to revive the domestic tourism industry, the government has unveiled a US$16 billion “Go To” campaign to subsidise domestic tourism. This has been temporary halted from 28 December 2020 and will continue to be suspended even after the government fully lifts the coronavirus state of emergency. Both of the Group’s self-managed boutique hotels, Noku Kyoto and Noku Osaka, have stepped up its marketing activities to capture the domestic market upon resumption of the campaign.
We are pleased that the Maldives has reopened its tourist resorts on 15 July 2020 and received its first international flight in over three months and the Group’s upscale resort in Maldives, Noku Maldives, has received positive enquiries since the travel restriction was lifted. Meanwhile, the Group’s second resort asset in Thailand, Noku Phuket, is expected to operate in 2022.
Our geographically-diversified portfolio will continue to provide some
resilience. Our focus will be to self-manage where possible, and improving
productivity, internal processes and operational efficiencies, to weather the
volatilities brought on by the pandemic.
In Australia, the office sector is not expected to face an immediate structural
shift in demand despite remote working measures implemented in response
to COVID-19. On the other hand, office assets in Sydney and Melbourne are
expected to continue to be highly sought after by investors given Australia’s
strong prospects for economic recovery, long-term growth potential, and ‘safe
The Group’s investment properties in Melbourne, Australia, namely the newly
acquired 350 Queen Street and the conversion of Park Hotel Melbourne into
a commercial development, are expected to benefit from this positive trend.
In Auckland, New Zealand, of our two key assets in New Zealand, 205 Queen
Street, located in the core of Auckland’s CBD, enjoyed high occupancy of 84%
as of 31 December 2020. We will look for opportunities to raise occupancy to
maximise rental yield. Additionally, our wholly-owned building, NZI Centre,
situated in the western end of Auckland’s CBD, is fully leased to a well-known
tenant – IAG New Zealand Limited – the largest insurer in New Zealand.
In Japan, whilst vacancies are expected to rise and new opening demand
anticipated to weaken, from Q1 2022, rents are projected to return to growth
as the economy is expected to recover, limiting the net rent decrease over the
next two years to 4.3%6. As part of our capital recycling strategy, the Group
acquired a 49% stake in a 5-storey retail building, Vivel Shibuya, located at
Shibuya-Ku, Tokyo, Japan, which is well-positioned in the central hub for
youth culture in Tokyo, and divested our 53.07% stake in a retail building at
Ginza in the same city.
Overall, the Group’s investment properties in these countries maintained a
high level of occupancy at 88% as at 31 December 2020.
We will continue to tap on strong partnerships with established industry
veterans to prudently grow our footprint in this country and beyond. Proactive
asset management will also remain a key focus as we look for opportunities
to unlock value by reinvesting towards potentially higher yielding assets.
WORDS OF APPRECIATION
I would like to thank our Board of Directors for their guidance in navigating
the Group through this unprecedented global crisis. At this juncture, on behalf
of the Board, I will like to warmly welcome our new Independent Director,
Mr Yeo Wee Kiong, who joined in October 2020. Mr Yeo, who brings with him
strong legal expertise and varied directorships in real estate, investments,
healthcare transport and engineering, has been appointed as a member of the
Audit Risk Management Committee, Nominating Committee and Remuneration
Committee. On behalf of the Board, I would like to take this opportunity to
express our appreciation to Mr Winston Tan Tien Hin, who will be stepping
down from the Board at the forthcoming Annual General Meeting. Mr Tan has
been an invaluable member of our Board for the past 14 years, and his strong
commitment and expertise has contributed greatly to the Group’s success.
I am also deeply appreciative of our senior management team, for their
commitment and dedication in helping the Group to overcome challenges
and adapt to the ‘new normal’, with the disruptions brought about by the
In closing, I would like to thank 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 ardent support as we remain focused on
building strong partnerships for a firm foundation and sustainable growth.
Teo Hong Lim
Executive Chairman and
Chief Executive Officer
15 March 2021