CFA Society Singapore
SINGAPORE (Jan 14): Property group Oxley could potentially reduce net debt-to-equity to 1.8 times from 2.5 times as at Sept 2018 if sale of its Mercure and Novotel hotels on Stevens Road is completed.
That's because that the cash proceeds will be able to alleviate some of the group’s urgent cash requirements, says DBS Group Research, especially in repaying its retail bonds – $300 million expiring on Nov 5 and $150 million expiring on May 18, 2020.
To recap, Oxley has accepted a non-binding letter of intent (LOI) from an unnamed buyer to purchase the group’s Mercure and Novotel hotels for $950 million.
The consideration is 5% above the book value of $905 million as at June 30, 2018.
The hotels started operations in 4Q17 and has hit 84% occupancy rate in August 2018. It was still incurring an operating loss as at end-June 2018. The land tenure is 103-year leasehold from July 18, 2013.
In an unrated report on Monday, analyst Rachel Tan says, “We estimate that the gross yield (based on annualised six months' revenue from opening up to June 2018) is 4.7%.”
Nonetheless, Oxley's results still lies on the group’s sale performance of 3,700 residential units of launch pipeline, the largest land bank in Singapore, and unsold inventory, potential receipts of proceeds from some of its overseas projects such as Royal Wharf and potential divestment of its Dublin properties.
As at 11.10am, shares in Oxley are trading at 31 cents.