SINGAPORE (May 28): RHB Securities is maintaining its “buy” call on Oxley Holdings with a revised target price of 29 cents. This is down 2 cents from its previous 31 cent call, analysts Jarick Seet and Lee Cai Ling outline in a May 27 note.
The move follows the property developer’s entrance into an expression of interest (EOI) with a buyer for the sale of its retail and banking units at Chevron House for $315 million on May 21.
Oxley has not identified this buyer or mentioned if it is linked to Golden Compass – the purchaser named in its proposed $1.03 billion sale of Chevron House in April 2019. Part of this saw Oxley divesting the retail and banking units of the commercial development. The 32-storey property in Raffles Place has a net floor lettable area of 261,280 sq ft.
Under its recent EOI, the prospective buyer may opt to ink a binding sale-and-purchase agreement with Oxley Beryl – the owner of Chevron House – by June 15. Thereafter, the divestment will be completed by June 30.
Touching on the sale, Seet and Lee say “the sale price is lower than expected”. This is “probably due to the current economic climate, which has been impacted by Covid-19’s spread,” they say, adding that Oxley will likely receive $200 million upon completion of the sale.
Comparatively, the company had paid $660 million for the Raffles Place development in December 2017.
“Despite a lower selling price, we feel it is still in Oxley’s favour to sell the asset, as it should still be making good profit. Additionally, the $200 million incoming from the sale should allow the group to shore up its balance sheet and quench investor’s fears on its debts,” Seet and Ling point out. “It should also allow Oxley to capture opportunities with better upsides in such a tough climate”.
Against a gloomy backdrop, Oxley’s management is maintaining its sales target of 95 – 100% of its local portfolio by the end of the year. For this, it does not rule out lowering prices to hasten sales.
However, it is looking at a three- to six-month delay in its projects in Dublin and the UK – depending on whether there is a further extension in the lockdowns imposed there.
Aside from this, the Seet and Ling say the usage of Oxley’s hotels at Stevens Road as alternative quarantine sites for Covid-19 patients saw it operating at full occupancy in April. Coupled with the 75% wage co-payment by the government, they expect the company to generate lower operating costs, and in turn a profit, from this deal.
For now, the developer is “comfortable with its current cash position and is still keen to reward shareholders with a special dividend this year,” the duo point out. A key risk they foresee is a global recession and a possible crash in property prices.
As at 12.24pm, shares at Oxley Holdings were trading flat at 24 cents.