DISTRESS

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The company was incorporated in Mar-2010 and listed in SGX in Oct-2010 as Oxley Holdings. 

Primary businesses are residential and commercial property developments, property investment and hospitality. 

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In FYJun19, property development constitute 89% of revenue, property investment 4% and hotel 7%. 

The company has operations in Singapore, Malaysia, Myanmar, Cambodia, Vietnam, Indonesia, Australia, China, Cyprus, Ireland and United Kingdom. 

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Until FYJun16, Singapore was the firm main market. From FYJun17, business in Europe gained significance for the company; contributing 25%, 90% and 71% of sales between FYJun17 - FYJun19. 

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Segment & Financial

Revenue for property investment grew steadily since inception in FYJun15 with positive but highly volatile results due to fair value adjustment.

Hotel revenue likewise grew YoY from FYJun18 to FYJun19; with business results turning positive in the last financial year. 

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Property development revenue had been declining since reaching a high of $1.3B in FYJun17. Revenue tend to be lumpy in nature; with revenue recognition driven by project progress and completion. 

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Operating Performance

Operating results held steady until FYJun17. Property development margin averages 23.6% from FYJun15-17. From FYJun18 margin fell to 11.6% and 4.2% in FYJun19. 

Despite positive results in both property investment and hotels, operating margin continue to decline. 

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Net profit and margin held steady in FYJun18 due to completion of The Bridge project in Cambodia by an associate/joint venture and fair value gain. 

In FYJun19, fair value gain constitute a substantial part of Oxley P&L results. 

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Debt

Total debt is about $2.8B with $515M short-term debt as of 2QDec19 and cash of $323M. Finance cost ballooned from $64M to $100M between FYJun18-19. Finance cost in 1HDec19 was $81M. 

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Situation

The company is now holding back new property development activities to conserve cash and reduce debt. 

No.3 Dublin Landings was sold for Euro 115M in 2QDec19 while Chevron House deal was delayed to 30Jun20. 

Hotel Mercure and Novotel at Stevens are used to house COVID-19 quarantine residences. 

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Opinion

Oxley is now in full deleveraging mode. Halting new projects to focus on completing existing developments and accelerate assets sale to pay down debt. 

Use of Mercure and Novotel at Stevens to house COVID-19 quarantine residences while positive in the short term, could potentially suffer customers risk avoidance post epidemic.

The rate of debt reduction will have a direct impact on finance cost. If left unchecked it will ballooned to as much as $160M a year.

In the last two financial years, fair value gains enabled Oxley to report steady net profit & margin. As economies are shifting towards recession, fair value adjustment could potentially impact the firms financial results.