Property investment and hospitality are the new frontiers for Oxley

Revenue contribution from investment properties is set to grow from 3.8% to 9.6% in 2020.

Real estate developer Oxley needs to strengthen its property investment and hospitality segment which is poised to account for a greater share of recurring income over the next two years, according to Soochow CSSD Capital Markets.

Revenue contribution from investment properties is expected to nearly triple from 3.8% in 2018 to 9.6% in 2020. “In addition, we also see the potential monetisation of its hospitality income portfolio into a REIT platform as a long-term catalyst (worth GDV of S$1.4bn),” said analyst Zhuoen Cheah.

As an early mover in land bank accumulation, the company is expected to fare well in the coming years amidst the recovery of the property market. Over the past year, Oxley has spent almost $1.3b in land banking to emerge as one of the largest residential pipeline holders in SIngapore with roughly 3,800 units on hand.

“As we speak, Oxley is already launching 170-unit project freehold The Varandah Residences at Pasir Panjang Road after just acquiring the site in July 2017, translating to turnaround time of 8 months,” Cheah added. 

Also read: Oxley to launch up to 7 projects in 9 months 

Revenues from booked sales continue to buoy Oxley's profitability as developments sales from its Singapore pipeline is slated to launch between March to July is setting the company on good financial footing.

Here’s more from Soochow CSSD:

With ~S$1.78bn of unbilled contracts vs debt of S$1.6bn over next 2-3 years, we think Oxley’s cash flow is secured and leverage will remain below 2x. In addition, we estimate Investment prop to gradually rise, making up ~10% of FY20E revenue, lending stability to earnings. Oxley’s hospitality assets value could reach S$1.4bn when completed – potential for a hospitality REIT listing in 2020.

As Oxley is well leveraged to the Singapore residential market with its market leading residential land bank size, Oxley may be subject to regulatory risks in Singapore residential market cooling measures should the residential market upswing grow at a fast pace.

As Oxley has diversified to more than 12 geographical markets including Singapore, the UK, Ireland, Australia, Cambodia, Malaysia, Indonesia, China, Japan and Myanmar, there could be risks that Oxley is spread too thin operationally. However, this risk is mitigated by strategic partnerships in overseas companies including the likes of Galliard Group (UK) and Pindan Group (Australia).