Excerpts from RHB report
Analyst: Jarick Seet
|• Maintain BUY with new TP of SGD0.31 from SGD0.36, 35% upside plus c.7% yield. Management is maintaining the sales target of its local portfolio by end-2020 and does not rule out lowering prices to attain faster sales.
• Cash flow survival is key. We held a conference call with Oxley. 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.
The company 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. Its 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 TP 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.
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 TP is based on a 55% discount to RNAV.
• Key risks: Recession and a crash in property prices.
Full report here.