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Sunday, 1 November 2015

Oxley Holdings Limited - 5% 4 Years

Oxley Holdings Limited ("Guarantor") is offering up to $125m of 4 years bonds at 5%. The key terms are as follows:

The key terms are as follows:

Amount:  Up to S$125m but can be upside to $300m if oversubscribed

Interest rate: 5% fixed

Interest Payment date:  Twice a year on 5 May and 5 November

Maturity date:  5 November 2019

Manager:  DBS Bank

Ratings:  Not rated

CPF application: Not allowed

SRS application: Not allowed for initial application but may purchase post listing

Minimum application: S$2,000 for public tranche and $100,000 for placement tranche.

Timeline:  The offer will close on 3 Nov 2015 at 12pm.

Oxley Holdings Limited

The Company is listed on Catalist on 29 Oct 2010 and transferred to the main board on 21 Feb 2013. The 'rags to riches' story of Ching Chiat Kwong is an interesting read. He is partly responsible for the "shoebox" craze in Singapore and he followed up with big bets at the Royal Wharf in London in 2013. I would agree that he has really "bet" well in the past but will luck run out of him one day given that his Company is really over-levered?

According to an article in EDGE last week, Oxley has pre-sold more than 2,000 residential units at the Royal Wharf and the first block will attain "TOP" in May 2016 where Oxley can get the remaining 80% from the buyers. Phase I will be completed by end 2017.

The same article mentioned that Oxley has unbilled revenue of $1.7b from oversea projects and these can be recognised when the projects are completed. In Singapore, it has $1.6b unbilled revenue of which more than $500m comes from Oxley Tower - which should be completed by 2017.

You can say that Oxley is a risk taker and one of the first movers in Cambodia and Myanmar. You would have see his advertisements of the Myanmar project at the PEAK, located with Shangri-la. His upcoming portfolio include hotels in Japan, Singapore, Phnom Penh and KL.

Oxley is also considering listing its property business in Malaysia to raise more equity.

 Financial Highlights

The Company seemed to be highly profitable but its cashflow in FY2015 has been financed by debt and only turned cash flow positive from operating activities in 1Q this year. 

The Company is highly leveraged with bank borrowings amounting to S$2.4b as of 1Q 2016.

Mr IPO's views

If i am to take a bet on Oxley, i rather invest in Oxley than the unsecured bond where the risk / reward just doesn't seem to make much sense. I am locked up for 4 years and earned a fixed interest rate of only 5% that somewhat doesn't commensurate with the risk that i am putting on given that the bonds are unsecured and will be ranked alongside all other unsecured debt. 

Personally, I will give it a miss. You can always purchase from the open market when there is better clarity on the success of some of its upcoming projects. The bond price is not going to run away from you in a rising interest rate environment.   


Edie Jams said...
This comment has been removed by a blog administrator.
Anonymous said...

Hi, just interested to know. What is the issue with the company's cash flow being financed by debt? Especially if the same industry competitors' cash flow are also being financed by debt? Isn't it like a normal industry practice then?


Curious student

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