RHB started Oxley Holdings at Buy with a S$0.41 target price, calling it a “major property sector bargain” and “significantly undervalued.”
The stock’s deep 60 percent discount to its revalued net asset value (RNAV), estimated at S$0.74, is likely due to high gearing and doubts over its debt repayment ability, RHB said in a note Thursday.
“Issues of its debt repayment should be resolved once it has sold some key assets. One of these, Chevron House, has already been sold,” RHB said. “In addition, out of its RNAV – on which the majority of the assets are already sold – the risk profile has been scaled down significantly. This does not warrant such a huge discount.”
It noted only S$450 million of retail bonds needs to be repaid by 2020, while Oxley has 237 million euros coming in 2020 from a Dublin project and another US$204 million from its Cambodia development.
That doesn’t include S$2.4 billion worth of locally sold residential units set to be booked, the potential for more than S$900 million from moves to unlock value from its Stevens Road hotels, and the S$210 million it has already received from the S$1.025 billion sale of Chevron House, the note said.
The two Stevens Road hotels had a previous bid of S$950 million and offer “an attractive proposition” any buyers as the replacement cost is above S$1 billion, RHB said, adding it expected something to emerge on that front in the next few months.
In addition, the stock has an 8.1 percent fiscal 2020 dividend yield and the potential for special dividends, RHB said.
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