SINGAPORE (Feb 8): Oxley Holdings says it is working to reduce its gearing and pursue an asset light business strategy as it continues to expand its operations overseas.
The homegrown developer, who listed on the Singapore Exchange’s Catalist board in Oct 2010 and was transferred to the SGX Mainboard in Feb 2013, has expanded beyond Singapore’s shores and now has projects in countries like China, UK, Myanmar, Cambodia, Japan, Australia, Malaysia, and Indonesia.
CIMB’s analyst William Tng noted that the group had $2.60 billion in unbilled contracts from Singapore and overseas. “Typically, management aims to achieve gross margins of above 30% for its projects,” explained Tng in a note on Wednesday. “It also expects recurring income to expand from its portfolio of industrial and hotel assets.”
In an unrated note on Wednesday, CIMB noted that the biggest risk with the developer lies in the potential regulatory and policy woes in less developed markets, though the management says it works with selected local partners which reduces such risks.
It also faces other risks like fluctuations in exchange rates, changes to taxation policies on property sales or rules on foreign ownership, and changes to interest rates and ease of borrowing, which explains Oxley’s move to deleverage.
As it stands, the group’s net gearing has already fallen from a historical high of 5.58 times at FY12 ended June, to 2.11 times at 2QFY17 ended December 2016.
In fact, the group’s operating cash flow turned positive in FY16, compared with the negative operating cash flow from FY11 to FY15. By 1QFY17 and 2QFY17, the group’s free cash generated was 5.9 times and 8.4 times of cash interest expenses paid respectively.
Shares in Oxley are trading at 52.5 cents on Wednesday.
