OXLEY HOLDINGS LIMITED (SGX:5UX)
Oxley Holdings - Correction Presents Opportunity; Maintain BUY
- Oxley's share price has corrected > 50% over a few weeks, partially due to COVID-19 and potential fears in the slowing property market in Singapore. However, we think the correction is overdone, coupled with the strong share buyback being executed.
- FY20F should be a great year for Oxley Holdings (SGX:5UX) with several catalysts like the closure of the sale of Chevron House, as well as a potential special dividend.
Majority of its portfolio has been sold.
- Oxley's UK and overseas projects have been mostly sold except for projects in China and Malaysia. Its Singapore residential portfolio, despite seeing unit sales slowing down, has already achieved 71% of units sold.
- Management aims to sell a majority of the remaining units by Dec 2020. Its Gaobeidian project is facing some hiccups mainly due to the COVID-19 pandemic, which has slowed property sales in China.
- Going forward, management is bullish on its opportunities in Vietnam, the UK and Myanmar, and will likely invest in projects in these countries if a good opportunity arises.
Near-term catalysts and COVID-19 stimulus.
- Management hopes to clear the sale of Chevron by end-2Q20. Earnings recognition from it is likely to provide a boost for Oxley in 2H20F.
- The company should also benefit from the 75% local wages subsidised from its hotel segment as property tax will be waived.
- An amount equivalent to 25% local wages (capped at SGD4,600 monthly salary) for nine months, across Oxley’s employees, will also be co-funded by the Singapore Government through the job support scheme and enhanced wage credit scheme.
Strong share buyback by corporate and key executives.
- Since 10 Feb 2020, Oxley has bought back 18.1m of its own shares at an average cost of 20.4 cents/share. The founders of Oxley have also bought a total of 10.426m shares at an average cost of 23.7 cents/share. We believe that this significant volume of buyback highlights a strong confidence the management has in the company.
Record FY20F, coupled with potential special dividends.
- Management guided that excess cash will be used to reward shareholders with special dividends. It hopes to lower gearing to 1.5x and below by end-FY20F.
- Oxley is trading at a deep 70% discount to our RNAV of SGD0.77. This, together with a 9.1% FY20F dividend yield, strong insider buying, as well as record FY20F, compels us to maintain BUY for Oxley.
- See Oxley Holdings Share Price; Oxley Holdings Target Price; Oxley Holdings Analyst Reports; Oxley Holdings Dividend History; Oxley Holdings Announcements; Oxley Holdings Latest News.
- Key risks are property cooling measures, and rising interest rates.
Jarick Seet
RHB Securities Research
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https://www.rhbinvest.com.sg/
2020-03-27
SGX Stock
Analyst Report
0.36
DOWN
0.420
