• BUY, new SGD0.43 Target Price from SGD0.41, 41% upside with 9.8% FY20 (Jun) yield.
• Oxley’s FY19 results are in line, with revenue/PATMI at SGD686.1m/SGD144.2m. FY20 should be a record year, with profits from the Chevron House sale, Dublin landing and Cambodia coming in.
• For its 10-year anniversary, management hinted it may pay a special DPS, which we estimate to be 3 cents. See Oxley's dividend history.
• Our Target Price, at a 45% discount to RNAV, has increased on the inclusion of a few new projects in the region.

Debts Slowly Being Pared Down

• OXLEY HOLDINGS LIMITED (SGX:5UX) has SGD2.18bn of debts expiring by 2020. However, the majority comprise property loans, which can easily be refinanced. Only SGD450m of its retail bond need to be paid by 2020.
• Meanwhile, Chevron House has been sold for SGD1.025bn, for which it received SGD210m. In addition, it also has EUR358.6m coming in 2020, from the Dublin project as well as another USD204m from its development in Cambodia.
• There is still SGD2.7bn worth of locally-sold residential units set to be booked into its coffers, and another > SGD900m from the potential value-unlocking of the Stevens Road hotels.
• Gearing has been lowered to 2.05 from 2.17, and should be significantly lowered further in FY20F.

Unlocking Value in Its Key Asset, the Stevens Road Hotels

• The Stevens Road hotels, which had a previous offer of SGD950m, is an attractive proposition for potential buyers. The replacement cost of building a similar hotel in the same area will likely also be north of SGD1bn, due to the surge in development charges required for hotel use – to SGD14,000 per sqm from SGD8,200 in 2017. The land terms have also been converted into freehold, which will be even more attractive to buyers.

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.
• Oxley is trading at a deep 58% discount to our RNAV of SGD0.74 (majority of assets are already sold). We believe that this is an attractive price level, ie close to its 5-year low – as investor sentiment was impacted by property sector cooling measures, as well as the misconception over its ability to repay debts. This, together with a 9.8% FY20F dividend yield, strong insider buying, as well as a record FY20F compels us to maintain BUY for Oxley.
• Oxley is one of our top small-mid cap picks for Singapore.
• Key risks include further property cooling measures, and rising interest rates.

Source: RHB Invest Research - 24 Sep 2019