We attended Oxley Holdings Limited’s non-deal roadshow held on 19 February 2020. Below are the highlights:
Summary
We expect visible cash flows over the next three years. This is from high presold unbilled revenues to be received upon project completions. We view management’s deleveraging efforts as credit positive. Oxley’s existing bonds reflect this through recent strong price appreciation.
Company Background
Oxley Holdings Limited (Oxley) is a Singapore Mainboard-listed property developer principally engaged in property development and investment. The Group’s portfolio comprises of residential, commercial and industrial projects in Singapore, the United Kingdom, Ireland, Cyprus, Cambodia, Malaysia, Indonesia, China, Myanmar, Australia, Japan and Vietnam.
Listed in October 2010, the group has a market cap of c.S$1.43bn and is majority owned by its management; executive Chairman and CEO Mr Ching Chiat Kwong (42.15%) and executive director and deputy CEO Mr Low See Ching (28.16%).
Roadshow Highlights
Deleveraging underway
Oxley’s gearing (net debt/equity) declined from a peak of 2.27x in FY2018 to 1.94x in 1H20 currently. Their gearing is expected to go below 1.5x within the next 2 years. The group will pare down debt with expected cash inflows of c.S$1bn from FY2020 to FY2021.
Oxley’s S$150mn OHLSP 5.150% retail bond will mature on 18 May 2020 and US$355mn (c.S$500mn) OHLSP 6.375% on 21 April 2021. Investment property loans will be refinanced. These amount to c.S$603mn for Oxley’s Singapore hotel properties, as well as S$286mn for their other investment properties. Investment property loans have short tenures of c.3 years and will be perpetually refinanced when they mature.
Oxley’s corporate loan covenants follow bond covenants. They require total debt/ total assets to be less than 70% (54% as of 1H20), a minimum net asset amount, and to achieve a certain sales target by stipulated periods of 12, 24 and 36 months at the individual property level.
Outlook
Strong cash flow visibility
The company expects to receive a total of c.S$3.3bn cash-flow from total unbilled revenue, with S$1bn of that within the next 2 years. This will consist of (i) profits from Dublin Landings Residential B and E to be completed by 3Q2020; (ii) c.US$250mn in November to December 2020 from the Royal Wharf completion, provided 100% sold (95% sold as of 1H20); (iii) US$70-100mn from The Peak, ranging mid-2020 to early 2021, (iv) Singapore project TOPs and (v) the remaining S$300mn from the Chevron House sale by May to Jun this year.
Singapore
Oxley expects to receive c.S$1.4bn in effective future progress billings from 2020 to 2023. This is through progressive project construction stages. 3 projects will TOP and be completed by 3Q to 4Q FY2020; The Verandah (4Q20), The Addition (2Q20) and Sixteen35 Residences (4Q20). The group also expects S$300mn from Chevron house, with management hoping to conclude banking hall and retail deals in the next couple of weeks.
In FY2019, revenue from Singapore made up c.26.5% of total revenue and c.79.0% of non-current assets. In property development sales, management said they are selling 7-8 units on average per week, despite the Covid-19 situation.
The group’s hotels include Novotel and Mercure on Stevens. These bring in c.S$40mn of annual recurring income. The Stevens hotels asset value amounts to c.S$1bn, which the group can consider liquidating in the future. c.S$603mn of debt pegged to these hotels will be refinanced perpetually.
Overseas
Total cash flow guidance of c.S$900mn from effective future progress billings to be received over the next 3 years.
UK
For the Royal Wharf, of the total 3,400 units, 150 units balance remain unsold. The group hopes to sell 50 or more units by this March, resulting in a balance of less than 100 units unsold. Upon the Boris government election, the group saw a surge in property purchases in London, and seeks to engage that market more.
Ireland
In Ireland, the group expects the remaining 270 apartments in Dublin Landings to complete by July to September this year. Upon completion, the group will receive cash flow after handing over the units. The group has also received EUR115mn (S$174mn) on 16 December 2019 for divestment of No.3 Dublin Landings.
Cambodia
For The Peak, office towers are 100% sold, residential c.90% sold and retail c.70% sold.
Malaysia
Oxley Towers Kuala Lumpur only c.20% sold, about c.RM400-500mn worth. Sales are guided to be weak, and construction cost estimated to amount to c.RM900mn (c.S$300mn), which the group will fund itself without construction loans. As the construction period will roughly take 3 years, construction costs will average about S$100mn per year.
No intention to purchase new landbank
Management does not intend to buy new landbank. They will allocate S$200-250mn in FY20 for construction of existing land bank to ensure cash flow and income visibility onwards from FY2024 to FY2025.
These landbanks include those in Connolly Station (Ireland), Deanston Wharf (London), The Garage (Cambodia) and Hamlet Watertown (Vietnam). Construction timelines will be based on presale performance.
