This article was recently published on www.nracapital.com and is reproduced with permission
No major surprises in the 2012 results.
I have liked Oxley Holdings since its IPO and especially after management executed their plans and sold more than S$1.3bn in property to be recognised over the next few years.
A change in accounting treatment for the recognition of property income, ie progressive for residential and on completion for industrial and commercial affected Oxley's profit recognition and by default its dividend payout.
In its prospectus, Oxley had agreed to pay 50% of FY2011, 30% of FY2012 and 20% of FY2013 net profit as dividends. The profit numbers are now substantially lower because of the accounting recognition but the underlying NAV remains unchanged.
Please read the FY2012 results announcement for details. Key numbers are:
Revenue in 2012 was up 125% to $159.4mn
Net profit rose to 63% to $23.7mn
NAV was $.0942 while EPS was $0.014 or 9.4 cents and 1.14 cents respectively
Company announced a final dividend of 0.47 cents compared to $0.45 cents in 2011
Gross debt as at June 30, 2012 was S$986mn with cash of $205mn giving net debt of $781.4mn
Shareholders funds was S$154mn giving a net gearing ratio of 5.1
Oxley following its results announcement has announced a corporate exercise comprising:
Please read their announcement for more details:
- a stock split 10 shares into 18 shares
- post the stock split a 1:10 rights issue at $0.17 which will raise between $37.5mn and $45.4mn. This amount is tiny when compared to its gross debt of $986mn.
- bulk of the rights proceeds will be used to retire debt of $36.5mn - which by default is the amount owing to directors.
The three major shares, CK Ching, Low See Ching and Tee - are owed an amount equal to S$36.5mn and will set aside the amount owning to them in lieu of their rights subscriptions. In other words they have capitalised their debt through this exercise.
Comment:
I like Oxley and think that on a discounted basis of future income, the shares are probably still worth more than S$0.55 but you may have to wait one of two years for this to happen. These numbers will now change because of the stock split and rights - a price target of $0.55 would now become about $0.27 other things being equal.
I am a little annoyed by the corporate exercise as it appears that one of the main purposes seems to be to capitalise the directors/shareholders loan at the rights price which is at a discount to the market price.
While the loan capitalisation in itself is good in that it signifies their commitment to the company and the business but in doing it via this process, it forces minority shareholders of Oxely to put in additional money - so if you own 10,000 shares - you have collected S$100 in dividends over the last two years.
You are now being asked to subscribe for the rights at $0.17 or pay $306.00. The shares are meanwhile just hovering slightly above their IPO price.
So you are being asked to put in more money and still wait 2-3 years - hopefully to see some capital gains. I would have preferred an EGM to capitalise the directors/shareholders loans and then let minority shareholders and the IFA determine whether the capitalisation price is fair or not.
As a gesture of goodwill to the minority shareholders, maybe Oxley can consider extending their dividend commitment of which ends in FY2013 at 20% of FY2013 net profit for another two years at the same rate !!
Recent story: KEVIN SCULLY: Medium-term target for Oxley is 58-66 cents
