Phillip on the Ground: Oxley Holdings 2Q19 Results Briefing August 28, 2019 427

Here are some key highlights from the Oxley Holdings 2Q19 Results Briefing: 

  1. Singapore property: Units are still moving and sales momentum is better. Since cooling measure introduced a year ago, the company has sold 60% of projects on hand. Launching mass-market units at $1500-1600 psft is still too high the price. There is demand for private residential property but buyers need time to accept the prices (and rationalise it). Mass market buyers are the HDB upgraders and sweet spot is $1300 to 1400 psft pricing. Surprised that North East (e.g. Hougang, Tampines) has been able to move good volumes despite a large number of launches (~6000 to 7000 units).

 

2. Purchasing of new residential land in Singapore: Unlikely to purchase until better clarity next year. Furthermore, land prices have not come down, development margins are low and new units now need to be larger*. Property cooling measure unlikely to loosen.

*effective Jan19, average size of private flats outside central areas will rise from 70 sqm to 85sqm. And nine designated areas is 100sqm.

 

3. Debt repayment schedule: In 2019, there is S$1.02bn of debt maturing, of which $300mn is a MTN bond due in November. Around S$529mn is an investment property loan on Novotel/Mercure hotel, which will be refinanced. The $300mn bond will be repaid from the S$474mn cash in hand plus sale of Chevron house proceeds (S$210mn) and disposal of Dublin block A3 to A5 (could total EUR500mn excluding 20.5% stake by the Irish government).

In 2020, the is another $822mn debt due, of which $150mn relates to a MTN bond and $407mn project debt. The project debt will primarily be repaid from proceeds of Royal Wharf handover units. Another source of funds will be Peak Cambodia proceeds (retail and residential) plus Dubline Block B and E.

 

4. Hong Kong: There has been increased demand for their UK projects by Hong Kong buyers.

 

5. Gaobedian, China: Project is preparing for a launch in October this year. Oxley has a 27.5% stake and GDV is S$4bn.

 

6. Malaysia: s.16 project in Petaling Jaya received approval for 2,000 units. The right demand for the market is smaller and more units.

 

7. FY20: Several revenue recognition opportunities such as the Peak (Cambodia) project of ~S$350mn, locals Singapore project (part of the ~S$1.3bn), Dublin revenue and the remaining Royal Wharf revenues of ~S$600mn. 

 

 

Comment

FY20 will be a more meaningful year in terms of revenue recognition. The big catalyst will be to dispose the S$1bn Novotel Singapore investment property. With the current collapse in interest rates and cap rates, inquiries have been improving. Other major property development projects to be sold by the company are Connoly Ireland (S$1.17bn effective GDV), Yangoon Central Railway (S$990mn effective GDV), Gaobedian (S$1.1bn effective GDV) and kent Ridge Singapore (S$543mn effective GDV).

 

# Phillip Securities Research does not have any research coverage or recommendation on Oxley Holdings.

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Paul Chew
Head of Research
Phillip Securities Research Pte Ltd

Paul has almost 20 years of experience as a fund manager and sell-side analyst. During his time as fund manager, he has managed multiple funds and mandates including capital guaranteed, dividend income, renewable energy, single country and regionally focused funds.

He graduated from Monash University and had completed both his Chartered Financial Analyst and Australian CPA programme.

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