Idea of the Week: Oxley Holdings – still holding up amidst trying times

• Oxley reported revenues decreasing by 13% year-on-year and as a result of lower revenues net profit for the period also saw a decrease of 18% year-on-year.

• Revenues for Oxley is expected to increase going into 2022 as a majority of their development projects in Singapore will reach their TOP dates in 2022.

• For 1H22, total cash and cash equivalents was SGD 199.7m, and is insufficient to cover its current borrowings of SGD 1,699m. Oxley’s ability to repay its debt obligations largely depend on the completion of its development projects.

• We prefer the OHLSP 6.500% 28Feb2023 Corp (SGD) over the OHLSP 6.900% 08Jul2024 Corp (SGD) due to its shorter maturity and it is currently trading at an indicative yield to maturity (“YTM”) of 6.92% for about 1 year in tenor.

On 10 February 2022, Oxley Holdings Limited (“Oxley”) reported earnings for the half year ended 31^st December 2021. Earnings were rather lacklustre as revenues and profits fell during the second half of last year.

On top of that, Oxley also announced the resignation of their Chief Financial Officer about a week after the release of their earning results. With borrowings of SGD 1,699m set to expire within the next twelve months, will Oxley have the ability to repay its debt obligations? This article will breakdown Oxley’s 1H22 earning results and discuss Oxley’s ability to pay down its debt obligations.

1H22 financial highlights

Revenues for Oxley for the half year ended 31 December 2021 (“1H22”) was SGD 506.4m, a 13% decrease year-on-year (“YoY”). The decrease was due to lower revenues from The Royal Wharf project in the UK as the development have already reached its Temporary Occupation Permit (“TOP”) in 2021. Revenues came from development projects in Singapore and the sale of land parcels in Australia. As a result of lower revenues, profit for the period was SGD 23.4m which was a decrease of 18% YoY.

Revenues for Oxley is expected to increase going into 2022 as a majority of their development projects in Singapore will reach their TOP dates in 2022. From Table 1, all development projects except for Parkwood Residences are expected to be completed in 2022. For projects reaching TOP in 2022, they have a remaining gross development value (“GDV”) of SGD 200m and Oxley is expected to receive future progress billings of SGD 1,532m.

Table 1: Oxley’s development projects in Singapore

For Oxley’s overseas development projects, Royal Wharf and Dublin Landings, which are Oxley’s highest development project in terms of GDV (SGD 2,812m and SGD 1,162m respectively) have TOP-ed in 2021. Looking ahead, overseas development projects have a remaining GDV of SGD 1,513m and future progress billings of SGD 280m. For overseas projects, most of the cash flow will be received upon the completion of the property. 

Looking beyond 2022, Oxley’s future projects in their pipeline have a potential GDV of SGD 2,454m. These projects include Connolly Station in Ireland, where a mixed development with residential units, office blocks and a hotel, will be built at the busiest railway station in Dublin and Ireland. The company has a 90% stake in the development and has an estimated GDV of ~SGD 1,400m.

Liquidity and credit profile

Oxley has a weak liquidity profile as the company is highly leveraged with debt. For 1H22, total cash and cash equivalents was SGD 199.7m, and is insufficient to cover its current borrowings of SGD 1,699m. Oxley’s gearing ratio was 2.01x as at 31 December 2021, a slight reduction from 2.18x at 30 June 2021.

Oxley has SGD 164m of debt maturing in FY22 (Chart 1). SGD 100m of its OHLSP 5.700% 31Jan2022 Corp (SGD) have already been redeemed by the company and SGD 4m of project loans and SGD 10m of Corporate loans will be repaid by proceeds from its development projects. Oxley has also refinanced its IP loans of SGD 40m and will mature in 2027.

Taking a look at Oxley’s debt maturity profile, at first glance, Oxley’s debt maturity profile looks intimidating as a majority of its debt is set to mature in FY23. For Oxley to repay its debt in FY23, they would have to rely on cash flows from the completion of its development properties in Singapore. As mentioned above, Oxley is expecting to receive SGD 1,532m of revenue to be recognised in FY23, which can be used to pay off its debt expiring in FY23. Additionally, Oxley may look to sell some of its hotel properties free up some liquidity if needed. Some loans may be refinanced as well and we believe that Oxley will have continued access to diversified funding sources including banks and debt capital markets.

Therefore, Oxley’s ability to repay its debt obligations largely depend on the completion of its development projects. Any unexpected delay could impact the company’s cash flow and may affect their ability to repay debts when due. Construction activities on Oxley’s projects in Singapore and overseas have resumed operations though the progress is still hampered by varying degrees of manpower shortages, supply chain disruption and safe distancing measures. The company’s management is expecting to complete all the remaining Singapore development projects in the next 12 months.

Chart 1: Debt maturity profile 

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