■ Strong pre-sales locally or overseas should translate to higher share price
■ Potential asset sales would greatly improve Oxley’s financials
Holds one of the largest landbanks in Singapore with over S$3.0bn worth of residential projects to be launched. After a 5-year hiatus, Oxley Holdings Limited (Oxley) returns with a bang, amassing a substantial residential landbank of nearly 4,000 units worth c.S$3.0bn in attributable gross development value (GDV). The Group (and its partners) collectively own one of the largest residential landbanks in Singapore. Near-term tailwinds from an improved residential market sentiment coupled with the delivery of strong sell-through rates for its projects when launched over 2Q18-2019 should drive its share price higher. The stock trades at a deep 50% discount to RNAV and a 40% discount to our fair value of S$0.68.
(1) Executing on its development projects in Singapore and overseas. With over 4,000 units to be launched in the coming quarters, representing over 12% of existing yet-to-be launched residential inventory, locking-in strong project sell-through rates will translate to improved earnings visibility and help to close the RNAV and NAV gap. In addition, with a large exposure to fairly untested markets for the Group, successful sales execution would also instill investor confidence on its overseas projects.
(2) 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 to be worth c.S$910m (S$1.2m/key). A sale would empower the Group with improved financial flexibility, lowering its debt-to-equity ratio towards peer average of 1.2x (vs 2.1x currently).
(3) Lowering its high gearing of 2.1x should instill investor confidence. Oxley’s high debt-to-equity ratio of 2.1x (as of 2Q18) is one of the highest among peers, which implies that the Group would need to remain nimble and maintain a quick-asset-turn strategy. The Group’s high debt level would be a concern in the event of an external shock or a slowdown in property sales momentum as it could undermine profits. Potentially higher interest costs upon refinancing of its bonds in 2019/2020 could mean a need to employ a quick-asset-turn strategy in this current property market upcycle. (Read Report)
Source : DBS Group Research