Oxley Holdings - RHB Invest 2020-04-13: COVID-19 Disrupts Operations; Maintain BUY


Oxley Holdings - COVID-19 Disrupts Operations; Maintain BUY

  • Management is maintaining the sales target of its local portfolio by end-2020 and does not rule out lowering prices to attain faster sales. Its overseas projects are likely to be delayed by 3-6months, depending on whether the lockdown globally is extended from COVID-19.

Cash flow survival is key.

  • We held a conference call with Oxley Holdings (SGX:5UX). Management shared a few vital updates during this difficult time. Cash conservation will be key to settle maturing debt over the next few years.
  • Going forward, it will not enter into new construction projects, and instead focus on completing projects with existing sales proceeds, as well as focus on offloading more of its local and overseas portfolios.
  • Oxley still aims to clear at least 90% of the local portfolio by end-2020.

Chevron house deal delayed due to global lockdown.

  • We understand that the deal is still ongoing – it is crucial upon the sale of the retail podium and the banking units at a stipulated price in the agreement. We understand that management is still in discussion with keen parties but any due-diligence has been hindered by the local and global lockdown as well as restrictions in air travel.
  • The worst case scenario sees Oxley having to repurchase the retail podium and sell it at a higher valuation when the situation improves.

Stevens Road hotel at full occupancy for Apr 2020.

  • Oxley's hotel at Stevens Road is now being used as an alternative quarantine site for COVID-19 patients, with all rooms fully taken up. With a 75% subsidy in labour cost by the Government, Oxley will likely generate profit for this deal due to lower operating cost incurred.

Maintain BUY with lower Target Price of SGD0.31.

  • Management is maintaining its sales target of 95-100% of its local portfolio by end-2020, and does not rule out lowering prices to attain faster sales as it entered the fray earlier than peers with a lower land price. Its overseas projects in Dublin and UK are likely to be delayed 3-6 months, depending on whether the lockdown globally is extended from COVID-19.
  • Management is comfortable with its current cash position and keen to reward shareholders with a special dividend this year.
  • Based on its track record, key management has always opted for script dividend, so, even with a special dividend being paid, Oxley would likely be able to easily stump up cash for minority shareholders.
  • Due to a delay in projects and drop in margins expected for local projects, we lower our RNAV valuation from SGD0.75 to SGD0.69. Our Target Price is based on a 55% discount to RNAV.
  • See Oxley Holdings Share Price; Oxley Holdings Target Price; Oxley Holdings Analyst Reports; Oxley Holdings Dividend History; Oxley Holdings Announcements; Oxley Holdings Latest News.
  • Maintain BUY with new Target Price of SGD0.31 from SGD0.36, 35% upside plus c.7% yield.
  • Key risks: Recession and a crash in property prices.

Jarick Seet RHB Securities Research | https://www.rhbinvest.com.sg/ 2020-04-13
SGX Stock Analyst Report BUY MAINTAIN BUY 0.31 DOWN 0.360