· The Edge Weekend Comment Apr 20: Bullish on Oxley
TOPICS : Heeton Holdings | Ksh Holdings | Lian Beng Group
Written by Chan Chao Peh
Friday, 20 April 2012 21:57
CHIN CHIAT KWONG, executive chairman and CEO of Oxley Holdings, has been busy recently. The man behind the developer which made its name selling shoebox units has snapped up four new sites totalling more than $330 million over the past month or so.
The flurry of acquisitions has prompted SIAS Research to upgrade Oxley’s price target by 7 cents to 60 cents. The stock, which has moved 12.86% over the past year, closed at 39.5 cents on Apr 20. “We are much impressed by the new assets as they each have their unique appeal. The four projects will generate about $166 million additional gross profit to Oxley,” states SIAS Research in a report on the same day.
Ching knows property remains a favourite asset with many Singapore investors. Despite round after round of cooling measures, private residential new sales for the first quarter this year hit 6,678 units, up 80.4% compared to the same period a year earlier.
While riding on this buoyant sentiment, Oxley has wisely diversified into other non-residential sectors like office and commercial space. “Oxley always managed to stay ahead of the trend and deliver what the buyers need, from residential shoebox projects to lifestyle and shoebox concepts in industrial and commercial projects,” notes SIAS Research.
The first acquisition is 11 King Albert Park, near the junction of Bukit Timah Road and the Pan-Island Expressway, in the vicinity of schools like Raffles Girls’ Primary School, Hwa Chong Institution, National Junior College, and further down the road, Ngee Ann Polytechnic and Singapore Institute of Management. For many former and present students of these schools, this is where their favourite hangout is located – the iconic McDonald’s fastfood outlet.
However, from Oxley’s perspective, the attraction of this site is the 119,109 sq ft of residential space and 59,554 sq ft of retail space that it can redevelop this site into. SIAS Research estimates Oxley can sell the space at $1,800 psf and $3,500 psf respectively for residential and retail. “Given its proximity to these attractions, we reckon there is huge potential for this site,” the research firm states. Oxley is not paying for the entire purchasing price of $150 million on its own. Joint venture partners have been found for this development, including subsidiaries of listed companies like Lian Beng Group, Heeton Holdings and KSH Holdings.
The second recent acquisition is 339 Joo Chiat Road, a residential and commercial development that sits in between two retail developments. Oxley, which is paying $8 million for this property, might apply for it to be re-zoned into retail purposes, which will fetch a higher selling price of around $2,500 psf, states SIAS Research.
The third acquisition by Oxley, at 66 East Coast Road, is within walking distance of the one at 339 Joo Chiat Road. Oxley is paying $76.1 million for the freehold seven-storey commercial property that now comprises of office units. It sits on a 22,147 sq ft big site. SIAS Research notes that adjacent and nearby properties like Roxy Square and Katong Shopping Complex are worth $2,145 psf and $1,816 psf respectively, and that Oxley is likely able to command prices at around $2,500 psf for the new development, as the developer has a proven track record of including attractive “lifestyle concepts” into its existing developments like Oxley Tower and Robinson Square.
The fourth development, along Cactus Road and formerly known as Seletar Garden, was bought for $96.2 million. The freehold site covers 73,100 sq ft and has a gross plot ratio of 1.4. SIAS Research notes that nearby private apartments, such as Centre Residences are at $1,600 psf, and terrace units of Banyan Villas are at $1,641 psf. Using these figures as a gauge, the new development can likely sell at $1,900 psf while retail space can sell for $2,500 psf.
Recent changes in accounting standards means that Oxley will not be able to recognise any revenue its existing industrial and office developments until they receive their temporary occupation permit. This means that there will be some $250 million that the company can book after 2015.
Investors tracking Oxley would also be glad to know that Ching, who is chauffeured around in a Rolls Royce, has been regularly buying his own company’s shares in the open market. The latest transaction filed on the Singapore Exchange, on March 7, saw him scoop up another 386,000 shares, bringing his total to 620,683,500 shares, or 41.69%. Around this time last year, he was holding on to 577,138,000 shares, or 38.76%.
Of course, Oxley will need to fund these construction activities. On March 30, the company announced that it is exploring options to raise funds for its working capital and is in preliminary discussions with potential investors. SIAS Research believes that this potential fund-raising should strengthen the company’s financial position and thus give it the ammunition to buy more sites. The market will be closely watching how Ching will step up on his deal-making.
