Excerpts from DBS Group Research report

Analysts: Carmen Tay & Rachel Tan

Riding on residential tailwinds
• One of the largest land banks with a substantial residential portion of c.4,000 units to be launched over 2018/2019

Oxley

Share price: 
48.5 c

Target: 
68 c

• Recurring income stream to grow strongly from an expanding commercial portfolio

• Strong sell-through rates and execution of its overseas ventures to alleviate concerns that financials are stretched

• Trading at 54% discount to RNAV; fair value of S$0.68



The Business
Strong pipeline of residential profits. After a 5- year hiatus, Oxley returns to Singapore with a bang, amassing a substantial residential land bank of nearly 4,000 units worth c.S$3.0bn in attributable gross development value (GDV).

With tailwinds from an improved residential market, strong sell-through rates for its projects when 
launched over 2Q18-2019 could drive its share price higher.

Outside 
Singapore, Oxley Towers KLCC and Deanston Wharf could contribute an additional c.S$1.3bn when launched and sold.

Potential unlocking of Singapore hotel assets, which could fetch bids of S$1.2m a key. The keen competition for hotel assets could offer an opportunity for Oxley’s recently completed Novotel and Mercure hotels, estimated at c.S$910m (S$1.2m/key), which we believe is not reflected in the share price. 

If a sale materialises, it would empower the group with improved financial flexibility, lowering its debt-to-equity ratio towards peer average of 1.2x (vs 2.1x as of 2Q18).

hotels10.17Oxley's twin hotels on Stevens Road, Singapore: The Novotel and Mercure.



Addressing its high leverage of 2.1x should instil investor confidence. Oxley’s high debt-to-equity ratio of 2.1x stands out among peers, which means that the group needs to remain nimble and maintain a quick-asset-turn strategy.

The group’s high debt 
levels will not put it in good stead in the event of an external shock or a slowdown in property sales momentum as it could undermine profits.

Potential higher interest costs upon refinancing of its bonds 
in 2019/2020 could mean that a quick-asset-turn strategy has to be employed in this current property market upcycle. Potential asset sales in Singapore and the UK will further strengthen its balance sheet.

The Stock
Trading at c.50% discount to RNAV. Our RNAV of S$1.05 is derived after revaluing Oxley’s existing investments and development projects. After imputing a 35% discount to RNAV (vs 10% discount for large-cap developers), we arrive at a fair value of S$0.68.

Key risks include 1) execution of project launches, 2) policy risk, and 3) rising gearing levels and interest costs in a rising rate environment.


Share Prices

Counter NameLastChange
AEM Holdings1.0000.005
Alliance Mineral0.155-0.005
Anchor Resources0.0130.001
AusGroup0.0280.001
Avi-Tech Electronics0.2700.005
Best World Int.1.360-
China Sunsine1.1400.020
CSE Global0.475-
Food Empire0.490-
Geo Energy0.155-0.001
Golden Energy0.2050.005
GSS Energy0.0770.002
HMI0.635-
ISDN Holdings0.230-
KSH Holdings0.425-
Miyoshi0.0410.001
Moya Asia0.075-
Nordic Group0.290-
Oxley Holdings0.315-
REX International0.0680.001
Riverstone0.925-0.005
Roxy-Pacific0.390-
Sing Holdings0.3850.005
SingMedical0.380-0.005
Sino Grandness0.0440.002
Straco Corp.0.740-0.010
Sunningdale Tech1.360-
Sunpower Group0.470-
The Trendlines0.080-
Tiong Seng0.245-
Uni-Asia Group0.760-
XMH Holdings0.153-
Yangzijiang Shipbldg1.460-0.010

NextInsight RSS

rss_2 NextInsight - Latest News

Online Now

We have 1249 guests and no members online