SINGAPORE (Oct 3): UOB KayHian is restarting coverage of Oxley Holdings with a “buy” and target price of 67 cents, pegged at a 20% discount to its RNAV of 84 cents/share.
In a Tuesday report, analyst Vikrant Pandey says the developer is poised to benefit from the Singapore property upcycle, as it has the largest residential landbank among the listed property stocks in Singapore.
“As a result of its early decision to accumulate landbank in Singapore in FY17, after years of diversifying overseas, Oxley has accumulated the largest residential landbank among the listed property stocks in Singapore with 2,833 units and GDV of $3.03 billion,” says Pandey.
Oxley has also showed execution astuteness in grabbing sites on the cheap in this en bloc wave. Its purchase of Serangoon Ville at a land rate of $835 psf ppr, is about 16% lower than the $964.80 psf ppr paid by Keppeland-WingTai JV for the nearby Serangoon North site.
“Every 10% increase in Singapore residential prices would result in a 3% increase in its RNAV,” adds the analyst.
Outside Singapore, Oxley has a diversified earnings base with $2.46 billion out of $5.44 billion in secured development sales yet to be recognised, spread across the UK, Ireland, Cambodia, Malaysia, Indonesia, Myanmar, and China.
In addition, Oxley has been growing its recurring income stream from its investment and hospitality properties, which is expected to grow from $11.3 million in FY17 to $167.1 million in FY21.
All this time, Oxley’s net gearing has decreased steadily from a high of 6.4x in FY12 to 1.9x in FY17, yielding positive operating cashflow for the first time in recent years of $328.6 million and $461.3 million in FY16 and FY17 respectively.
Pandey expects Oxley’s net gearing to de-gear further to 1.35x by FY20, as debt is paid down with the completion and handover of development projects. In the next 12 months, he expects some $1.12 billion out of $2.46 billion in unbilled contracts for development properties to obtain TOP and handover.
Finally, Oxley’s 27.5% stake in China’s Gaobeidian is proving to be a massive jackpot, as it is located just north of the recently announced Special Economic Zone (SEZ) -- Xiongan New Area (XNA).
“For every 10% increase in ASP, we expect Oxley’s profits to increase by $105.6 million or a 2 cents accretion to RNAV,” says Pandey.
Shares in Oxley are up 1 cent at 58 cents or 9.2 times FY18 earnings and 1.6 times book value.
