With a mere current market cap of only $934mil ($0.22 per share), Oxley is going to recognize an estimated $2.2 billion worth of revenue (already secured) over the next 3 years, more than 2 times its current market cap. 

Has Mr Market undervalued Oxley too much because of its gearing concern?

Oxley is trading at 58% discount to RNAV of $0.52

Why Oxley is good for the next few years?

&bull Due to the construction delays for its projects in Singapore, Ireland, and Malaysia, as well as the deferred start of new construction sites, some of the earning for FY2020 has been deferred to FY2021 and FY2022. Hence, FY2021 (and to some extent FY2022) should see a bumper harvest in EPS. UOB analysts have raised their net profit estimates for FY21-22 by 27% and 28% respectively.  UOB analysts expected EPS of 9 cents for FY2021, EPS of 4.1 cents for FY2022, and EPS of 5.1 cents for FY2023. Assuming a dividend payout ratio of 50%, expect a dividend bonanza for next 3 years.

&bull There will be bound to be project delays given the current situation, but  Oxley is in good shape to ride out COV19 recession.  There should be sufficient liquidity to cover all non-rollover maturing debts when they come due. For upcoming 2021, Oxley only needs to clear $480mil bond, which is more than sufficiently covered by earmarked proceeds from existing projects. Only corporate debts and bonds need to be paid at maturity. Project loans are only due when projects are completed and are repaid with project sales proceeds, while investment property loans are refinanced on a recurring basis.

&bull   Oxley has additional financing avenues if needed,  and is in the process of divesting non-core assets with a renewed focus on development projects. Some funding sources can be secured through (i) the group&rsquo s unbilled revenues (S$2.4bn from Singapore projects), and (ii) unencumbered hotels in Cambodia (indicative valuation S$150mn as of Feb 2020). Management is also looking to divest a land parcel in Cambodia (c.US$50m), Walker Street in Australia for S$90m (net of loans) and its 10% Aspen stake, pending group&rsquo s cash-flow situation.

&bull   Real estate development fund. This is slated to be the next game plan for Oxley. Setting up a real estate development fund to scour for opportunities in developed, transparent markets. This is really moving up the value chain of development activities. Rather than to be encumbered by the capital-intensive nature of land development and construction cost, the risk involved is much lower because it does not stretch the balance sheet as much.
 

 

SOME buyers of Oxley Holdings' The Peak, a mixed-use development in Cambodia, are banding together to withhold completing payment for the retail units that have been handed over to them, because of what they see as patchy transparency on the developer' s part.

 

The buyers are also worried about the company' s finances.

 

Oxley Gem, a subsidiary of Singapore-based developer Oxley Holdings, had on Aug 14 asked buyers of its retail units to make their fifth and final payment - amounting to half the purchase price - for their purchases, as their units would be handed over by Aug 31. This was about three months earlier than the scheduled Dec 31 delivery date stated in their sale-and-purchase agreements.

 

But some buyers are taking issue with paying, as they are concerned about whether the project will be completed as scheduled. Based on video footage and photographs furnished by the buyers and Oxley and seen by The Business Times over the past week, the facade of the development is still incomplete, and scaffolding is still up.

 

The buyers got together via instant messaging app Telegram last week to air their grievances. BT understands that some have since completed payment, ahead of the extended deadline of Sept 11.

 

The Peak is Oxley' s second integrated mixed-use development in Cambodia' s capital city Phnom Penh, jointly developed with local real estate company Worldbridge Land. The freehold, 55-storey project occupies a land area of 135,723 sq ft. It will offer a total of 1,014 apartments across two towers, a commercial tower that will house 15 floors of office units, a 300-room Shangri-La Hotel, and a five-storey retail podium.

 

CapitaLand has been appointed to manage the 420,000 sq ft retail mall.

 

In response to queries from BT, an Oxley spokesperson said the Cambodian authorities have given Oxley Gem the green light to proceed with a multi-stage handover of the project units this process was also undertaken for The Bridge, the first collaboration between Oxley and Worldbridge.

 

Only the indoor retail units of The Peak have been handed over to buyers to date. " The retail podium, which occupies the first five levels of the building structure, were completed in accordance with the construction schedule," said the spokesperson.

 

She added that the handover of the indoor retail units will enable Oxley Gem to carry out necessary alteration and reconfiguration work.

 

" The appointed retail mall manager will then be able to conduct its leasing and fitting-out activities to ensure the smooth commencement of operation of the retail mall in the second quarter of 2021," she said.

 

Yoong Ying Ying, who bought a retail unit at The Peak, told BT she was surprised to be asked to pay up, given the current state of construction: " We were surprised to be requested payment, as we looked at pictures of the construction and it is nowhere near completion. We couldn' t get a clear answer back from Oxley as to how they would determine that (the final payment) is now due."

 

Oxley acknowledged that while the sale-and-purchase agreements did not expressly state that the handover would be done in stages, the handover process thus far has been guided by lawyers in Cambodia.

 

The agreements inked for these units contain a 10-year lease buyback by Oxley, which includes a three-month fitting-out period.

 

Ms Yoong said: " But how is it supposed to be ready for rental three months from now? The ambiguity really is around how exactly Oxley determined that now is the time to have us complete payment of the 50 per cent."

 

Another buyer, who wanted to remain anonymous, raised concerns over Oxley' s financial position, asking whether this was being done to boost the company' s cash flow.

 

Oxley recorded a net loss of S$296.3 million for the second half of the financial year ended June 30, a sharp reversal from the S$62.5 million net profit in the year-ago period. This came despite revenue quadrupling to S$638.9 million, from a restated S$160.3 million in the year-ago period.

 

Oxley had earlier been in the spotlight for being highly geared. Net gearing as at fiscal year ending June 30 rose to 2.48 times from a year ago, said a UOB Kay Hian report on Sept 1. This was attributed to a drop in net equity as a result of fair-value losses on assets in fiscal year 2020.

 

In April this year, Oxley Gem commenced legal proceedings in Singapore against its former contractor Sino Great Wall Engineering Co (SGW) in a dispute over The Peak, with Oxley seeking compensation for alleged damages from SGW' s repeated breaches of its obligations.

 

ERA Realty' s head of research and consultancy Nicholas Mak said the crux of the issue is the representation made to the buyers during the time of purchase. " It depends on what was made known to the buyer and what the buyers understand (to expect during a handover), such as whether everything has been nicely done, completed, and there will be lots of shoppers, and so on," he said.

 

He noted that multi-stage handover processes are more common for " very big projects" like Singapore' s Suntec City, an 11.7-hectare mega-development comprising five office towers, an exhibition and convention centre and a shopping mall.

 

Ang Chung Yuh, manager at the fixed-income division of iFAST Financial' s Bondsupermart team, said that while there is some cause for concern over Oxley' s financial liquidity, his team is " cautiously optimistic" that the company will meet its near-term financing and debt repayment needs.

 

" On the operating side, we are still looking at good visibility as to when cash flow will come in&hellip The company usually gives good cash flow and earnings guidance when the market has concerns over its financial health. Its track record has been quite good so far in terms of meeting this kind of guidance."