reporter2
22-05-18, 23:35
Will Oxley pull off its property launch blitz?
Tue, May 15, 2018
Lynette Khoo
HAVING made a splash overseas by developing the Royal Wharf project in the UK at unprecedented speed, Oxley Holdings looks ready to set a new precedent - this time in its home market. If things go according to plans, it would be the first developer to launch close to 4,000 residential units in one year here.
The developer's corporate presentation materials show it is targeting to launch its entire Singapore residential portfolio of over 3,900 units this year with a total gross development value (GDV) of S$5 billion.
Such speed-to-market approach is in stark contrast to some of its peers, who have snapped up sites much later at higher prices and are hence waiting for a more opportune time to launch their projects.
Oxley's "asset-turn" speed is notable. Its deputy CEO Eric Low says that the group is turning around collective sale sites into launch-ready projects within seven to eight months, similar to the time it takes to prepare sites acquired under the government land sales and obtain the requisite approvals for sale, notwithstanding the fact that collective sales tend to be a more protracted process.
Inevitably, this perceived gungho-ness has raised the eyebrows of some sceptics who see this as an urgent bid to pare debts. Oxley's net gearing shot up to 2.4 times as at March 31 from 1.9 times as at end-2017 due to its S$660 million acquisition of Chevron House and a flurry of land acquisitions here.
A strong sell-through for its projects locally and overseas will certainly enable Oxley to trim its gearings over time and lift its credit profile. But with an interest coverage ratio of 3.2 according to Bloomberg estimates, Oxley is not in a precarious position when it comes to meeting its interest obligations, with 90 per cent of its S$3.3 billion debt as of March 31 maturing from 2020 onwards.
Perhaps, another way to read its strategy is the urgency of a management team eager to grow the company rapidly by redeploying its capital quickly.
For now, local execution risks are mitigated by strong market momentum, as seen in the stunning take-up rates in new launches this year. Oxley's 170-unit condominium project at Pasir Panjang, The Verandah Residences, is almost fully sold within a month; over at Geylang, it has sold more than half of the 60-unit Sixteen35.
By shoring up its landbank earlier and at lower costs before many other developers, Oxley is enjoying wider margin buffers for its Singapore projects. This enables it to leverage on a first-mover advantage amid looming supply.
As at end-Q1 2018, there were 24,193 unsold units (including executive condominiums) with planning approval. There are another 20,100 units from government land sales sites (including confirmed list sites that are not awarded yet) and awarded en-bloc sale sites that have not been granted planning approvals yet. A large part of these 20,100 units could be made available for sale later this year or next year, according to the Urban Redevelopment Authority. In comparison, developers sold over 14,500 units, including ECs, last year.
DBS Group analysts note in a report that in District 19, supply is building up with a potential launch of close to 5,181 units over the next one to two years. The former Rio Casa and Serangoon Ville sites acquired by the Oxley-led consortium account for close to half of the supply in this district.
Assuming an average 70 per cent take-up rate for all its Singapore projects, which seems achievable in today's market, Oxley could unlock some S$2.24 billion share of gross development value (GDV), which it can progressively recognise.
Elsewhere, it has another S$1.2 billion of unbilled progress billings from its Royal Wharf project that could be recognised by this year. The launch of other overseas projects, where sales will be recognised upon handover, is also on track this year.
On that note, the group has clear earnings visibility, assuming strong sales in its projects globally. Its total S$10.5 billion share of remaining GDV globally as at March 31, based on its effective stakes, is expected to be recognised over the next five years.
It would then appear that despite market talk that Oxley may sell its two Singapore hotels at Stevens Road valued at S$886 million, it is under no pressure to do so. Some observers are also expecting Oxley to strata-title Chevron House and sell the units piecemeal, thinking that this is "Oxley style".
The 'new' Oxley
But the group has been anything but predictable in its past 10 years of operating history. While it made a name here for introducing affordable shoebox apartments and strata-industrial projects with lifestyle facilities, it has built its branding overseas with the iconic Royal Wharf project in London with Ballymore by building it at half the time it would have taken a UK developer for a project of this scale. It has since moved on to eye-catching mixed-use projects in Dublin and Yangon in prime locations.
Its aggressive overseas expansion has no doubt put a strain on its balance sheet, with its net gearing as high as four times in fiscal 2014. But it has since adopted an asset-light strategy overseas through partnerships with landowners and local governments. Overseas projects made up over 70 per cent of its total GDV as at March 31 but overseas loans accounted for only 27 per cent of the total S$3.3 billion debt as at March 31. Of course, this may not fully reflect how much loans go into overseas projects since the group can use unsecured borrowings including medium term notes and retail bonds of over S$1 billion as at March 31 to finance overseas projects.
But Oxley surprised the market last year when it swung back to Singapore in a big way after a five-year hiatus. It did so by snapping up sites in the collective sales market, even before the official property price index turned the corner in the third quarter of last year. Currently, only two other Singapore-listed developers City Developments Limited and UOL Group and three private developers match up in their size of local residential landbank based on effective stakes.
The equity market has rewarded Oxley handsomely with a price-to-book ratio of 1.6 times, seldom seen for Singapore developers. All eyes will be on how Oxley will now pull off its record streak of property launches. How will it mark history again in the annals of Singapore's property market? Investors won't have to wait too long to find out.
Tue, May 15, 2018
Lynette Khoo
HAVING made a splash overseas by developing the Royal Wharf project in the UK at unprecedented speed, Oxley Holdings looks ready to set a new precedent - this time in its home market. If things go according to plans, it would be the first developer to launch close to 4,000 residential units in one year here.
The developer's corporate presentation materials show it is targeting to launch its entire Singapore residential portfolio of over 3,900 units this year with a total gross development value (GDV) of S$5 billion.
Such speed-to-market approach is in stark contrast to some of its peers, who have snapped up sites much later at higher prices and are hence waiting for a more opportune time to launch their projects.
Oxley's "asset-turn" speed is notable. Its deputy CEO Eric Low says that the group is turning around collective sale sites into launch-ready projects within seven to eight months, similar to the time it takes to prepare sites acquired under the government land sales and obtain the requisite approvals for sale, notwithstanding the fact that collective sales tend to be a more protracted process.
Inevitably, this perceived gungho-ness has raised the eyebrows of some sceptics who see this as an urgent bid to pare debts. Oxley's net gearing shot up to 2.4 times as at March 31 from 1.9 times as at end-2017 due to its S$660 million acquisition of Chevron House and a flurry of land acquisitions here.
A strong sell-through for its projects locally and overseas will certainly enable Oxley to trim its gearings over time and lift its credit profile. But with an interest coverage ratio of 3.2 according to Bloomberg estimates, Oxley is not in a precarious position when it comes to meeting its interest obligations, with 90 per cent of its S$3.3 billion debt as of March 31 maturing from 2020 onwards.
Perhaps, another way to read its strategy is the urgency of a management team eager to grow the company rapidly by redeploying its capital quickly.
For now, local execution risks are mitigated by strong market momentum, as seen in the stunning take-up rates in new launches this year. Oxley's 170-unit condominium project at Pasir Panjang, The Verandah Residences, is almost fully sold within a month; over at Geylang, it has sold more than half of the 60-unit Sixteen35.
By shoring up its landbank earlier and at lower costs before many other developers, Oxley is enjoying wider margin buffers for its Singapore projects. This enables it to leverage on a first-mover advantage amid looming supply.
As at end-Q1 2018, there were 24,193 unsold units (including executive condominiums) with planning approval. There are another 20,100 units from government land sales sites (including confirmed list sites that are not awarded yet) and awarded en-bloc sale sites that have not been granted planning approvals yet. A large part of these 20,100 units could be made available for sale later this year or next year, according to the Urban Redevelopment Authority. In comparison, developers sold over 14,500 units, including ECs, last year.
DBS Group analysts note in a report that in District 19, supply is building up with a potential launch of close to 5,181 units over the next one to two years. The former Rio Casa and Serangoon Ville sites acquired by the Oxley-led consortium account for close to half of the supply in this district.
Assuming an average 70 per cent take-up rate for all its Singapore projects, which seems achievable in today's market, Oxley could unlock some S$2.24 billion share of gross development value (GDV), which it can progressively recognise.
Elsewhere, it has another S$1.2 billion of unbilled progress billings from its Royal Wharf project that could be recognised by this year. The launch of other overseas projects, where sales will be recognised upon handover, is also on track this year.
On that note, the group has clear earnings visibility, assuming strong sales in its projects globally. Its total S$10.5 billion share of remaining GDV globally as at March 31, based on its effective stakes, is expected to be recognised over the next five years.
It would then appear that despite market talk that Oxley may sell its two Singapore hotels at Stevens Road valued at S$886 million, it is under no pressure to do so. Some observers are also expecting Oxley to strata-title Chevron House and sell the units piecemeal, thinking that this is "Oxley style".
The 'new' Oxley
But the group has been anything but predictable in its past 10 years of operating history. While it made a name here for introducing affordable shoebox apartments and strata-industrial projects with lifestyle facilities, it has built its branding overseas with the iconic Royal Wharf project in London with Ballymore by building it at half the time it would have taken a UK developer for a project of this scale. It has since moved on to eye-catching mixed-use projects in Dublin and Yangon in prime locations.
Its aggressive overseas expansion has no doubt put a strain on its balance sheet, with its net gearing as high as four times in fiscal 2014. But it has since adopted an asset-light strategy overseas through partnerships with landowners and local governments. Overseas projects made up over 70 per cent of its total GDV as at March 31 but overseas loans accounted for only 27 per cent of the total S$3.3 billion debt as at March 31. Of course, this may not fully reflect how much loans go into overseas projects since the group can use unsecured borrowings including medium term notes and retail bonds of over S$1 billion as at March 31 to finance overseas projects.
But Oxley surprised the market last year when it swung back to Singapore in a big way after a five-year hiatus. It did so by snapping up sites in the collective sales market, even before the official property price index turned the corner in the third quarter of last year. Currently, only two other Singapore-listed developers City Developments Limited and UOL Group and three private developers match up in their size of local residential landbank based on effective stakes.
The equity market has rewarded Oxley handsomely with a price-to-book ratio of 1.6 times, seldom seen for Singapore developers. All eyes will be on how Oxley will now pull off its record streak of property launches. How will it mark history again in the annals of Singapore's property market? Investors won't have to wait too long to find out.