KSH reported 1QFY15 PATMI of S$9.6m, down 15.7% YoY mostly due to lower contributions from both the construction and property development segments and a weaker share of profits from associates given lower progress recognition at JV development projects. We judge this set of results to be mostly in line with expectations and 1QFY15 PATMI now make up 27.6% of our full year forecast.
In terms of the topline, 1QFY15 revenues also decreased 14.6% YoY to S$62.5m as construction revenues dipped 15.0% YoY to S$60.9m while development revenues ceased given the TOP of Lincoln Suites.
KSH’s order book for its construction segment remains fairly healthy at S$490m as at end Jul-14, having recently clinching a S$147.8m public sector project for the design, construction, completion and maintenance of an integrated Community Building. The group continues to enjoy a strong balance sheet with S$104.5m in cash and a low gearing of 2%. Maintain BUY with an unchanged fair value estimate of S$0.71. (Eli Lee)
I suspect Oxley has been underperforming (vs other developers) because:
1. It does not have high NAV or RNAV. Property stocks that have high RNAV tend to have price support.
2. Oxley is, to me, more of a concept (ie, Ching’s agility and aggressiveness) counter. Perhaps investors are giving less value to Oxley now that (a) the big money made in Singapore’s Mickey Mouse units in all sectors is over, (b) higher interest rates will hit the more highly leveraged companies more, (c) aggressiveness in land acquisitions is not valued when bubbles are expected to be deflated. Oxley does not fall into the same basket as safer value stocks like CES, Hiap Hoe, KSH, etc.
3. Perhaps there is shorting of property counters, as the physical prop market is weak. The active stocks will be more susceptible, especially if they are not supported by high NAV.
Note, however, that the above are just my educated guesses.
Nevertheless, with Oxley’s major shareholders holding more than 80% of the co’s scrip, I will not be surprised if positive news flows emerge. Perhaps when the stock trades cum-stock split, some price support may emerge.
From my cursory investigation into Oxley (this counter is new to me), I can see why its price has come down in the last 4 months. Current P/E of 28.9 (very high compared to other property counters), net debt / equity is 4.7 (very high) and NTA/share of $0.08 (very low). The only good thing about it is its high ROE of 29% but only in the last FY. All these numbers taken from ShareInvestor.com website based on FY13 performance. My initial conclusion is that it is over-priced relative to other property counters. Just my own two-cents of opinion. (not vested)