Oxley Holdings - Opportunity to Liquidate United Engineers Stake; BUY

Date: 29/10/2019

Source  :  RHB
Stock  :  Oxley       Price Target  :  0.43      |      Price Call  :  BUY
        Last Price  :  0.355      |      Upside/Downside  :  +0.075 (21.13%)

  • BUY, SGD0.43 Target Price, 26% upside.
  • Yanlord Land (SGX:Z25)’s GO for United Engineers (SGX:U04) is at SGD2.60/share, giving Oxley an opportunity to unlock its value (an ongoing concern for many investors). If realised, Oxley will be able to channel the > SGD300m proceeds for other uses. See Yanlord Land Announcements; Yanlord Land Latest News.
  • With profits from the Chevron House sale, Dublin Landings and Cambodia, it should enjoy a record year in FY20F.
  • There could also be a possible special dividend for its 10-year anniversary, which we estimate at 3 SG cents (8.8% FY20F (Jun) yield).

A Chance to Unlock Value in United Engineers

  • OXLEY (SGX:5UX) owns 120.6m United Engineers (SGX:U04) shares, representing a 18.92% stake in the latter.
  • Despite the general offer (GO) price of SGD2.60/share being lower than its cost (which we estimate at SGD2.70), this will enable Oxley to unlock SGD313.6m in cash – which can be used to pare down debts, reward shareholders with special dividends, or be used to invest in other property projects. This should also give the company an opportunity to arrest ongoing investor concerns regarding the direction of its stake in United Engineers.
  • Management is still exploring options, and will likely do what is beneficial for shareholders, in its view.

Nos. 4 and 5 Dublin Landings Sale Proceeds Received

  • Oxley has completed the sale of no.4 and no. 5 Dublin Landings at finalised prices of EUR98.6m and EUR106.5m (excluding value-added taxes). It has received 79.5% of the sales consideration from the purchaser, and the rest will go to National Asset North Quays DAC. This substantial amount of cash will likely help in lowering its gearing level, while raising the potential for special dividends this year. See Oxley Holdings Announcements.

Record FY20F, Coupled With Potential Special Dividends

  • Management guided that excess cash – after paring down gearing – will be used to reward shareholders with special dividends if there are no suitable opportunities at that time. See Oxley Holdings Dividend History.
  • Oxley is trading at a deep 61% discount to our RNAV of SGD0.79 (majority of assets are already sold). This, together with a 8.8% FY20F dividend yield, strong insider buying, as well as a record FY20F compels us to maintain BUY for Oxley. See Oxley Holdings Share Price; Oxley Holdings Target Price.
  • Oxley is one of our top small-mid cap picks for Singapore. See report: Small Mid Cap Highlights - Sticking To Our Top Picks.
  • Key risks include further cooling measures affecting the property market, and nterest rates.

Source: RHB Invest Research - 29 Oct 2019

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Labels: Oxley

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Oxley 0.355 0.00 (0.00%) 203 

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