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Analyst remain bullish as Oxley goes into cash conservation mode for survival

Stanislaus Jude Chan
Stanislaus Jude Chan • 3 min read
Analyst remain bullish as Oxley goes into cash conservation mode for survival
"Cash flow survival is key," analysts say. Oxley has $150 million of bonds maturing in May 2020, which are expected to be redeemed with existing cash.
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SINGAPORE (Apr 13): Property developer Oxley Holdings is putting new projects on hold as it aims to conserve cash to ensure its survival amid the Covid-19 pandemic. But analysts are optimistic that the company will be able to ride out the challenging times ahead.

“[Oxley’s] primary goal is to conserve and accumulate cash to settle the maturing debt,” says Timothy Ang, a credit analyst at Phillip Securities Research, in a note on April 13.

“Key loans to note are corporate debt and bonds, which have to be paid at maturity,” he adds. “$150 million of bonds maturing in May 2020 are expected to be redeemed with existing cash.”

As at end-December 2019, Oxley cash on hand of $323 million.

“Cash flow visibility show adequate cover for maturing debt for the next two years, assuming projects are completed on time,” Ang says.

The management has guided that it will not be entering into any new construction projects. Instead, it will focus on completing projects with most achieved sales to receive sales proceeds, as well as drive Singapore project sales by compressing margins.

“Projects put on hold include Mozac in Vietnam and parts of Oxley Towers Kuala Lumpur,” Ang says, noting that construction for other parts of the Malaysia project will still continue and is expected to unlock existing progress billings of $114 million.

While the project completions have been delayed, the analyst says Oxley has “no cash flow issues for now”.

Indeed, “cash flow survival is key,” says RHB Group Research analyst Jarick Seet.

The way Seet sees it, Oxley’s overseas projects are likely to be delayed by three to six months – depending on whether the global Covid-19 lockdown is extended – due to shut down orders and constrained supply chains.

However, he notes that the management is maintaining the sales target of its local portfolio by end-2020 and does not rule out lowering prices to attain faster sales.

“The company still aims to clear at least 90% of the local portfolio by end-2020,” Seet says in an April 13 report. “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, the company would likely be able to easily stump up cash for minority shareholders,” he adds.

RHB is keeping its “buy” call on Oxley, and lowering its target price to 31 cents, from 36 cents previously, on the back of lower revalued net asset value (RNAV) valuations.

Meanwhile, Oxley’s Chevron House deal has also been delayed due to the global lockdown.

“$295 million remains to be received from the Chevron House sale,” says Phillip’s Ang. “If the retail podium is not sold by June 30, 2020, Oxley will have to purchase it at a steep discount from valuation and attempt to sell it in the market at current valuation at a profit.”

Shares in Oxley closed 1 cent lower, or down 4.4%, at 21.5 cents on Monday.

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