Amala Balakrishner  28/05/2020, 12:39pm

SINGAPORE (May 28): RHB Securities is maintaining its &ldquo buy&rdquo 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&rsquo 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 &ndash 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 &ndash the owner of Chevron House &ndash by June 15. Thereafter, the divestment will be completed by June 30.

 

Touching on the sale, Seet and Lee say &ldquo the sale price is lower than expected&rdquo . This is &ldquo probably due to the current economic climate, which has been impacted by Covid-19&rsquo s spread,&rdquo 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. 

&ldquo Despite a lower selling price, we feel it is still in Oxley&rsquo 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&rsquo s fears on its debts,&rdquo Seet and Ling point out. &ldquo It should also allow Oxley to capture opportunities with better upsides in such a tough climate&rdquo .

Against a gloomy backdrop, Oxley&rsquo s management is maintaining its sales target of 95 &ndash 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 &ndash 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&rsquo 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 &ldquo comfortable with its current cash position and is still keen to reward shareholders with a special dividend this year,&rdquo 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.
https://www.theedgesingapore.com/capital/brokers-calls/its-buy-oxley-despite-risks-recession-and-softer-property-prices