Oxley Holdings - RHB Invest 2019-11-14: Stronger Quarters Ahead; Maintain BUY


Oxley Holdings - Stronger Quarters Ahead; Maintain BUY

  • Maintain BUY and SGD0.43 Target Price, 23% upside plus c.9% yield.
  • OXLEY HOLDINGS (SGX:5UX) reported a positive 1QFY20 (Jun), with revenue rising 66% to SGD282.8m and PATMI surging to SGD12.2m from a loss of SGD0.66m a year ago – mainly due to projects in the UK, Singapore and Malaysia. The retail bond of SGD300m has been fully redeemed and cancelled. See Oxley Holdings Announcements.
  • We expect much stronger quarters ahead due to recognition of the remainder of the Chevron house sale and the Dublin and Singapore projects.

A chance to unlock value in United Engineers.

  • Oxley owns 120.6m United Engineers (SGX:U04) shares, representing 18.92% stake in the latter. Yanlord Land (SGX:Z25) announced that it is raising the general offer (GO) price of SGD2.60/share to SGD2.70/share, which is around its cost (which we estimate at c.SGD2.70).
  • This will enable Oxley to unlock SGD325.7m in cash – which can be used to pare down debts, reward shareholders with special dividends, or be used to invest in other property projects. This should also give the company an opportunity to arrest ongoing investor concerns regarding the direction of its stake in United Engineers.
  • Management is still exploring options, and the two likely options are either to sell the stake or place a competing offer as management sees a great upside in the assets of United Engineers.

Singapore portfolio selling well.

  • As at 3Q19, management sold about 67% of its portfolio and averaging about 100 units/month YTD-2019. It also noticed that the property market has picked up and hence, it is more positive on the Singapore property market for 2020.
  • It has raised prices in a few of its existing projects by 1-2% due to new launches around the same area likely to be selling at much higher prices. Management expects to clear most of its Singapore portfolio by end-2020.

Record FY20F, coupled with potential special dividends.

  • Management guided that excess cash – after paring down gearing – will be used to reward shareholders with special dividends, if there are no suitable opportunities at that time. See Oxley Holdings Dividend History.
  • The counter is trading at a deep 61% discount to our RNAV of SGD0.79 (majority of assets are already sold). This, together with 8.7% FY20F dividend yield, strong insider buying, as well as a record FY20F compels us to maintain BUY. See Oxley Holdings Share Price; Oxley Holdings Target Price.
  • Oxley is one of our small-mid cap Top Picks for Singapore. See report: Small Mid Cap Highlights - Sticking To Our Top Picks.
  • Key risks include further cooling measures affecting the property market, and interest rates.

Jarick Seet RHB Securities Research | Lee Cai Ling RHB Invest | https://www.rhbinvest.com.sg/ 2019-11-14
SGX Stock Analyst Report BUY MAINTAIN BUY 0.430 SAME 0.430