SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

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Equity Bottom-Up

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
<h2>Oxley Holdings (OHL SP)</h2>
Impeccable Track Record
Oxley trades at an attractive 52% discount to our S$0.72 RNAV (0.9x P/B), from undue “overhang” of cooling measures and gearing concerns. Much less appreciated is the group’s stellar Singapore residential sales (about 63% sold) and S$3.9b unbilled sales (vs S$3.1b net debt). The group also had a demonstrable 22% ROE (peer average: 7%) in 2014-18, enabled by its fast turnaround, astute landbanking and leverage. Resume coverage with BUY and target price of S$0.50, pegged at a 30% discount to RNAV.
<ul>
<li>Strong earnings visibility from diversified base; spreads out local regulatory risks. Oxley Holdings (Oxley) has a diversified earnings base with S$3.9b of S$7.5b in secured development sales yet to be collected, spread across Singapore (56%), the UK (15%), Ireland (15%), Cambodia (11%), Malaysia (2%) and Indonesia (1%); this can help the group balance the risk of changes in local government measures.</li>
<li>Singapore residential sales (c.63% sold) to remain stellar, thereby transferring holding risk to buyers. As of end-Sep 19, Oxley had sold about 63% of its 2,226 attributable units (total: 3,814 units/est. GDV: S$4.86b). Management expects Singapore residential sales to reach 70% by end-19 (and sell out completely in 12-15 months). Upcoming nearby rival launches (eg Sengkang Grand Residences, Royal Green) are also expected to draw new buying interest to Oxley’s more attractively-priced projects.</li>
<li>Gearing concerns overblown; to subside on project completions and potential hotel sale. Net gearing has declined steadily (from high of 6.22x in FY10) to 2.05x in FY19. Much less appreciated is Oxley’s high cash flow visibility from S$3.9b unbilled sales (vs S$3.1b net debt). Of this, unbilled sales from overseas projects (S$1.7b), like Royal Wharf, Dublin Landings, The Peak, are proven in terms of revenue recognition and cash collection. The remaining S$2.2b Singapore progress billings are unlikely to see drop-offs (ie given the progressive payment scheme where 20% of purchase price is committed at the point of booking a unit). Management may revisit the sale of Novotel &amp; Mercure Singapore on Stevens (totalling 772 rooms, 11 commercial units) with an indicative valuation of S$1.053b in 2020 if there are good offers, as the supply situation is expected to tighten on the back of more regional events in even years (eg 2020 and 2022). Amid signs of growing investor interest, cap rates for Singapore hotels also compressed to 3.25% (vs 4.5% a year ago), based on valuers’ input in their FY19 annual reports. Land tenure of Novotel &amp; Mercure Singapore on Stevens has also been converted to freehold, which will further increase its appeal to buyers.</li>
<li>Re-initiate with BUY. We re-initiate coverage on Oxley with BUY and a target price of S$0.50, based on a 30% discount to RNAV of S$0.72/share.</li>
</ul>

These equity research reports are not written by the SGX. SGX supports the distribution of the research reports by external contributors. Please refer to the Disclaimer in the attached report.
Oxley Holdings (OHL SP)
Impeccable Track Record
Oxley trades at an attractive 52% discount to our S$0.72 RNAV (0.9x P/B), from undue “overhang” of cooling measures and gearing concerns. Much less appreciated is the group’s stellar Singapore residential sales (about 63% sold) and S$3.9b unbilled sales (vs S$3.1b net debt). The group also had a demonstrable 22% ROE (peer average: 7%) in 2014-18, enabled by its fast turnaround, astute landbanking and leverage. Resume coverage with BUY and target price of S$0.50, pegged at a 30% discount to RNAV.

Strong earnings visibility from diversified base; spreads out local regulatory risks. Oxley Holdings (Oxley) has a diversified earnings base with S$3.9b of S$7.5b in secured development sales yet to be collected, spread across Singapore (56%), the UK (15%), Ireland (15%), Cambodia (11%), Malaysia (2%) and Indonesia (1%); this can help the group balance the risk of changes in local government measures.
Singapore residential sales (c.63% sold) to remain stellar, thereby transferring holding risk to buyers. As of end-Sep 19, Oxley had sold about 63% of its 2,226 attributable units (total: 3,814 units/est. GDV: S$4.86b). Management expects Singapore residential sales to reach 70% by end-19 (and sell out completely in 12-15 months). Upcoming nearby rival launches (eg Sengkang Grand Residences, Royal Green) are also expected to draw new buying interest to Oxley’s more attractively-priced projects.
Gearing concerns overblown; to subside on project completions and potential hotel sale. Net gearing has declined steadily (from high of 6.22x in FY10) to 2.05x in FY19. Much less appreciated is Oxley’s high cash flow visibility from S$3.9b unbilled sales (vs S$3.1b net debt). Of this, unbilled sales from overseas projects (S$1.7b), like Royal Wharf, Dublin Landings, The Peak, are proven in terms of revenue recognition and cash collection. The remaining S$2.2b Singapore progress billings are unlikely to see drop-offs (ie given the progressive payment scheme where 20% of purchase price is committed at the point of booking a unit). Management may revisit the sale of Novotel &amp; Mercure Singapore on Stevens (totalling 772 rooms, 11 commercial units) with an indicative valuation of S$1.053b in 2020 if there are good offers, as the supply situation is expected to tighten on the back of more regional events in even years (eg 2020 and 2022). Amid signs of growing investor interest, cap rates for Singapore hotels also compressed to 3.25% (vs 4.5% a year ago), based on valuers’ input in their FY19 annual reports. Land tenure of Novotel &amp; Mercure Singapore on Stevens has also been converted to freehold, which will further increase its appeal to buyers.
Re-initiate with BUY. We re-initiate coverage on Oxley with BUY and a target price of S$0.50, based on a 30% discount to RNAV of S$0.72/share.


Non-SGX Report: Oxley Holdings (OHL SP): Impeccable Track Record 

Singapore

Oxley Holdings Ltd. develops real estate. The Company develops residential and commercial projects in accessible locations. Oxley also develops light industrial buildings that include swimming pools and other recreational amenities.

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