Oxley Holdings Limited – Investor Roadshow Highlights February 21, 2020 560

We attended Oxley Holding’s non-deal roadshow held on 19 February 2020. Below are the highlights:

  • Issuer profile: We are POSITIVE on Oxley. We expect visible cash flows over the next three years given high presold unbilled revenues to be received upon project completions. We view management’s deleveraging efforts as credit positive, with existing bonds reflecting this through strong price appreciation.

 

Company Background

Oxley Holdings Limited (Oxley) is a Singapore Mainboard-listed property developer, principally engaged in property development and investment. The Group has a diversified portfolio comprising residential, commercial and industrial projects in Singapore, the United Kingdom, Ireland, Cyprus, Cambodia, Malaysia, Indonesia, China, Myanmar, Australia, Japan and Vietnam. The group was listed in October 2010 and has a market cap of c.S$1.43bn.

The group is majority owned by its management, executive Chairman and CEO Mr Ching Chiat Kwong (42.15%) and executive director and deputy CEO Mr Low See Ching (28.16%).

 

Roadshow Highlights

Deleveraging underway

Oxley’s gearing (net debt/equity) is down from a peak of 2.27x in FY2018 to currently 1.94x in 1H20. Gearing is expected to go below 1.5x within the next 2 years. They will pare down debt with expected cash inflows of c.S$1bn from FY2020 to FY2021.

The group’s S$150mn OHLSP 5.150% retail bond will mature on 18 May 2020 and US$355mn (c.S$500mn) OHLSP 6.375% on 21 April 2021.

Investment property loans amounting c.S$603mn for Oxley’s Singapore hotel properties, as well as S$286mn for other investment properties, will be refinanced. These loans, with short tenures of c.3 years, will be perpetually refinanced when they mature.

Oxley’s corporate loan covenants follow bond covenants, requiring total debt/ total assets less than 70% (54% as of 1H20), a minimum net asset amount, and at the individual property level, to achieve a certain sales target by stipulated periods of 12, 24 and 36 months.

 

Outlook

Strong cash flow visibility

The company expects to receive a total of c.S$3.3bn cash-flow from total unbilled revenue, with S$1bn of that within the next 2 years.

This will consist of (i) profits from Dublin Landings Residential B and E to be completed by 3Q2020; (ii) c.US$250mn in November to December 2020 from the Royal Wharf completion, provided 100% sold (95% sold as of 1H20); (iii) US$70-100mn from The Peak, ranging mid-2020 to early 2021, (iv) Singapore project TOPs and (v) the remaining S$300mn from the Chevron House sale by May to Jun this year.

 

Singapore

Effective future progress billings due to Oxley of c.S$1.4bn, to be paid progressively through project construction stages from 2020 to 2023. These cash flows will come from 3 projects to TOP and be completed by 3Q to 4Q this year, The Verandah (4Q20), The Addition (2Q20) and Sixteen35 Residences (4Q20). As well as S$300mn from Chevron house, with management hoping to conclude banking hall and retail deals in the next couple of weeks.

Revenue from Singapore made up c.26.5% of total revenue and c79.0% of non-current assets in FY2019. In property development sales, management said they are selling 7-8 units on average per week, despite the Covid-19 situation.

Hotels include Novotel and Mercure on Stevens. These bring in c.S$40mn of annual recurring income to the group. Asset value is c.S$1bn should they wish to liquidate. c.S$603mn of investment property debt will be refinanced perpetually.

 

Overseas

Management guides cash flow of c.S$900mn from effective future progress billings to be received over the next 3 years.

 

UK

For the Royal Wharf, of the total 3,400 units, 150 units balance are unsold. Management hopes to sell 50 or more units by this March, resulting in a balance of less than 100 units unsold. After Boris’ government was elected, the group saw a surge in property purchases in London, and seeks to engage the market more.

 

Ireland

In Ireland, Dublin Landings is left with 270 apartments to be completed by July to September this year, which will bring in more cash flow. The announced divestment of No.3 Dublin Landings for EUR115mn (S$174mn) on 16 December 2019 has been received.

 

Cambodia

For The Peak, office towers are 100% sold, residential c.90% sold and retail c.70% sold

 

Malaysia

Oxley Towers Kuala Lumpur only c.20% sold, about c.RM400-500mn worth. Sales are guided to be weak, and construction cost is estimated to amount to c.RM900mn (c.S$300mn), which the group will fund itself without construction loans. As the construction period is about 3 years, construction costs will average about S$100mn, which management states is manageable.

 

No intention to purchase new landbank

Management does not intend to buy new landbank. They will allocate S$200-250mn in FY20 for construction of existing land bank to ensure cash flow and income visibility onwards from FY2024 to FY2025. These landbanks include those in Connolly Station (Ireland), Deanston Wharf (London), The Garage (Cambodia) and Hamlet Watertown (Vietnam). Construction timelines will be based on presale performance.

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Timothy Ang
Research Analyst
Phillip Securities Research

Timothy covers credit analysis of local and foreign bonds. Previously an equity dealer, he handled equity trade execution and portfolio management. He has presented seminars for organisations such as SIAS, SPH and IRAS, commentated live market updates for 93.8FM, and authored investment articles for the Business Times newspaper. He graduated with a Bachelor of Commerce in Accounting & Finance from the University of Western Australia.

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