Excerpts from Maybank Kim Eng report

Analyst: Derrick Heng, CFA

Outperformance to continue; initiate with BUY


Share price: 
46 c

56 c

We initiate coverage of Oxley with a BUY and SGD0.56 TP, based on a 20% discount to our RNAV.

We expect its sector-leading returns to continue, on the back of contributions from new local launches and the recognition of strong overseas presales. We forecast ROEs of 16% for 2018-20E vs a 6% average for its peers.

Trading at a 38% RNAV discount and 8x P/E, valuations are not demanding against its robust outlook, in our view.

Capturing Singapore’s residential rebound
eric ching7.16L-R: Deputy CEO Eric Low; Chairman and CEO Ching Chiat Kwong. NextInsight file photo.We believe successful launches by Oxley in Singapore’s residential market could narrow its RNAV discount, as it would crystalise about 10cts/share of development surplus.

With timely land acquisitions in the early part of this cycle, we estimate it has over 4,000 units worth SGD5b in GDV to capture a residential rebound. And with a land-cost advantage at several projects, we expect competitive pricing for swift sales.

Value creation from repositioning of Chevron House
In addition, we think Oxley can capitalise on this office upcycle to generate 3.5 cts/share of value with its newly-acquired Chevron House.

While the market has been focusing on vacancy risks from an impending exit of its anchor tenant, we see an opportunity to fill up this vacancy with higher-yielding tenants. Along with plans to boost the property’s NLA by 20% via AEI, we see the potential for a 35% NPI uplift by 2021E.

Venture overseas a hallmark of its versatility
Unbilled overseas sales of SGD1.6b have effectively locked in 4.8cts/share of surplus, in our estimation.

Oxley has been switching between asset classes and geographical markets over the recent property cycle and we see its venture overseas as a hallmark of its versatility. This has been key to its sector-leading returns, after the local housing market slowed in 2013, in our view.

Decent interest coverage; high gearing a constraint
With cashflow visibility from strong unbilled sales and growing recurring income, we are confident about its debt-servicing ability in the year ahead.

Even after pricing in a 50bps rate hike, EBITDA should be able to cover cash interest expense by a decent 1.7x. Nonetheless, elevated gearing could limit its ability to take on more projects, as it has debt headroom of just SGD0.5b to its debt-covenant limit.

Rising star that investors can no longer ignore; initiate with BUY

With total returns of 276% since Dec 2010, Oxley’s stock has outperformed the sector, which has returned just 34%. We believe its outperformance was spurred 
by its sector-leading ROE of 33% in the past five years vs 9% for peers.

We forecast 16% for 2018-20E vs a 6% average for peers. With enlarged shareholders’ equity of SGD1.3b vs SGD120m immediately after its IPO, we believe it now has the balance-sheet capacity to compete head-on with its larger peers for bigger and more sophisticated projects.

Oxley is also now more investible, with a larger free float of 20% and enhanced stock liquidity after its recent share placements.

At a 38% discount to RNAV and 8x FY19E P/E, valuations are not demanding against its robust growth outlook, in our view.

Initiate with BUY and a SGD0.56 TP, based on a 20% discount to our RNAV of SGD0.71.

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