Oxley Holdings - Maybank Kim Eng 2018-07-06: Highly Exposed To Residential Headwinds

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OXLEY HOLDINGS LIMITED SGX:5UX

Oxley Holdings - Highly Exposed To Residential Headwinds

Downgrade to HOLD with lower Target Price of SGD0.34

• We downgrade Oxley to HOLD from BUY with a lower Target Price of SGD0.34, based on a 50% RNAV discount (from 20% previously). 
• With almost 30% of its valuation due to the Singapore residential market, we expect the recent policy tightening to weigh on stock sentiments.
• We cut RNAV by 4.2% for ASP downgrades.

Cut ASPs; Leverage magnifies EPS impact

• With 5-10% increases in the ABSD for property investors, we expect developers to lower their ASPs to stimulate demand. With about 3,800 housing units (as of May 2018), Oxley has one of the largest pool of saleable resource in Singapore.
• Nonetheless, the company managed to de-risk part of its exposure by launching Riverfront Residences and Affinity at Serangoon before the cooling measures were implemented on 6th July.
• We lower ASPs by 3-7% and cut EPS by up to 16%. We expect its elevated financial leverage to magnify the impact on its bottom line.

Sector Report:

• Singapore Property Sector : Back To Tightening Mode ~ Let The Dust Settle; Downgrade To NEUTRAL 

Other Property Developer Stocks:

• Bukit Sembawang - Most Exposed To Singapore’s Residential Market

• Ho Bee Land (HOBEE) - Diversification Pays Off

• UOL Group Ltd - Oversold

• City Developments - Policy Overhang

• CapitaLand - Small Exposure To SG Residential

• GuocoLand - Limited Upside

Derrick Heng CFA Maybank Kim Eng | https://www.maybank-ke.com.sg/ 2018-07-06

SGX Stock Analyst Report HOLD Downgrade BUY 0.34 Down 0.560