Brokers’ take

Compiled by Lynette Tan

OXLEY HOLDINGS | BUY

TARGET PRICE: $0.43

SEPT 24 CLOSE: $0.31

RHB Research Institute, Sept 24

Oxley's FY2019 results are in line, with revenue/net profit attributable to shareholders after deducting minority interests (patmi) at $686.1 million/$144.2 million. FY2020 should be a record year, with profits from the Chevron House sale, Dublin landing and Cambodia coming in.

Oxley has $2.18 billion of debts expiring by 2020. However, the majority comprise property loans, which can easily be refinanced. Only $450 million of its retail bond needs to be paid by 2020.

There is still $2.7 billion worth of locally-sold residential units set to be booked into its coffers, and another more than $900 million from the potential value unlocking of the Stevens Road hotels. Gearing has been lowered to 2.05 from 2.17, and should be significantly lowered further in forecast FY2020.

Management guided that excess cash - after paring down gearing - will be used to reward shareholders with special dividends, if there are no suitable opportunities at that time.

The counter is trading at a deep 58 per cent discount to our revalued net asset value (RNAV) of $0.74 (majority of assets are already sold). We believe that this is an attractive price level, i.e. close to its five-year low - as investor sentiment was impacted by property sector cooling measures, as well as the misconception over its ability to repay debts.

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SINGAPORE REITS (S-REITS) | NEUTRAL

PhillipCapital, Sept 23

The strong rally in prices due to the dovish stance communicated by the US Federal Reserve has resulted in the FTSE S-Reit index return gains of 22.0 per cent year to date. Most of the upside from the lower interest rate stance have been priced in, with many Reits trading at rich valuations (+2 standard deviation price to net asset value or P/NAV).

The P/NAV is supported by investors' appetite for yield instruments.

The current interest rate environment is conducive for Reits, which have been busy with acquisitions and equity fund raising, as well as terming out loan maturities to lock in the lower interest rates.

September saw asset acquisitions by three S-Reits - the dual acquisition of Keppel DC Singapore 4 and 1-Net North Data Centre by Keppel DC, a pivotal acquisition of 13 data centres by MapleTree Industrial Trust, and the acquisition of 400 Capitol in Sacramento by Manulife US Trust.

We like the commercial and hospitality sub-sectors due to tapering supply after the surge in supply in the prior two to three years.

We are cautious on the retail sub-sector... due to the softer retail outlook as seen by the weaker retail sales index.

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