SINGAPORE (July 12): Oxley Holdings’ recent share price correction has created a buying opportunity, says NRA Capital.
Since the announcement of recent property curbs on July 5, Oxley’s share price has corrected by 12.2% from 41 cents to 36 cents.
Oxley says it has $3 billion of unbilled progress billings. In addition, the group has $3.1 billion worth of overseas projects to be launched.
Assuming these projects are fully sold over two years at an average net margin of 12.8%, NRA expects profit recognition of $776.5 million upon completion of the projects.
In addition, the group has marked up margins of 12% to 25% for its projects in Singapore so even if the prices slip by 5%-7%, these projects will remain profitable, says NRA.
Meanwhile, downside risk is also capped by strong projected cashflows as the group expects to reap $368 million/$753 million/$653 million from its overseas projects in 2H 2018/2019/2020.
The group estimates that its remaining projects in Singapore have a total revenue potential of $2.8 billion. Assuming these projects are sold at a lower net margin of 7.8% over time, NRA says the group can be expected to earn PATMI of $218.6 million from future project sales in Singapore.
All in, NRA expects the group to make $995 million of net profit from its pipeline. After applying a subjective discount of 50% and adding back the group’s current book value, NRA has an indicative fair value of 43.5 cents per share or 1.40 times book value.
“At 36 cents, the group trades at 1.16x P/BV and a low 9M18 annualised P/E of 7.40 times. Hence, we opine that the selling has been overdone and Oxley’s share price now presents a buying opportunity,” says analyst Liu Jinshu in a Thursday report.
Meanwhile, Oxley management has stepped up share purchases this week, buying some 7.52 million shares from the market. This should provide liquidity against sellers and limit further downside to the group’s share price.
“In this note, we indicatively rate Oxley Overweight,” says Liu.
Shares in Oxley closed 0.5 cent lower at 36 cents on Thursday.
