- From net profit to net loss - For the full-year ended 30 June 2023 (“FY23”), Oxley saw a net loss of SGD 85.0m, falling significantly from the net profit position in FY22. In FY23, Oxley saw a relatively large drop in revenue at 31%, from SGD 925.9m (FY22) to SGD 640.4m (FY23). As a result, gross profit had been considerably lower in FY23 at SGD 96.6m, as compared to SGD 129.6m in FY22. Oxley reflected that substantial revenue on the existing projects had already been recognised prior to FY23, resulting in lower gross profit while finance costs on borrowings went up.
- Cash position fell after repaying debt - All of Oxley’s projects in Singapore had attained TOP as of FY23, which generated relatively high net cash flow from operating activities at SGD 665m in FY23 as compared to SGD 251m in FY22. However, the majority of cashflow had been utilised by Oxley to pay off its debts. This resulted in a net cash outflow for Oxley in FY23, with the existing cash position falling from SGD 122m in FY22 to SGD 101m in FY23.
- Incoming cashflow from projects - Of its Singapore’s development projects, Oxley expects effective future progress billings of SGD ~278m. For its overseas projects, effective future progress billings stand at SGD ~341m while the remaining gross development value (“GDV”) to be recognised upon sale is approximately SGD ~886m. Oxley’s overseas projects are expected to TOP mostly in 2024 and 2025. As such, we expect minimum incoming cashflow of about SGD 0.6b as the projects gradually completes in the upcoming years.
- Oxley remains highly leveraged - A quick glance at Oxley’s borrowings shows a current borrowing of SGD 567.6m and total borrowings of SGD 1,702.8m. Majority of Oxley’s borrowings are secured (approximately 79%), indicating the use of its assets as collateral for borrowings. Oxley remains highly leveraged despite paring down its borrowings by SGD 613.6m – gearing ratio fell from 1.99x in FY22 to 1.6x in FY23. While the future progress billings should help with the repayment of debts, Oxley likely still need to rely on refinancing for its debts.
Oxley’s credit profile appears riskier than most high-yield issuers in Singapore. Outlook for Oxley remains challenging given the current economic conditions. While there are remaining gross development value (“GDV”) for Oxley to recognise as revenue, high interest rates globally weigh significantly on property demand which adds to the uncertainty of revenue in upcoming projects.
That said, we do not think bondholders of OHLSP 6.900% 08Jul2024 Corp (SGD) have to be overly worried. With a maturity of 0.84 years, we think the company should be able to make payments for the bond (both the interest payments and principal of SGD 205m). In our view, this should mostly come from 1) impending cashflow from future progress billings (about an estimated ~300m is likely to come in by 1H24, mostly from the completion of Singapore’s projects) and 2) tapping into more secured borrowings, where necessary, for the refinancing of their ongoing debts.
Given the challenging economic environment, we still prefer investment-grade issuers for Singapore corporates. For investors who might prefer high-yield issuers given the risk appetite, investors might want to consider issuers with more stable credit profile and earnings outlook. For example, issuances such as TMGSP 5.500% 31May2028 Corp (SGD) or CHIPEN 6.500% 06Dec2024 Corp (SGD).
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) hold a position in OHLSP 6.900% 08Jul2024 Corp (SGD), and the analyst who produced this report hold a NIL position in the abovementioned securities.
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