OXLEY UPS THE ANTE WITH ANOTHER SGD 3Y BOND
*** NEW ISSUE: OXLEY SGD 3 YR ISSUE ***
Issuer: Oxley Holdings Limited
Status: Direct, unconditional, unsubordinated and unsecured Notes
Rating: Unrated
Format: Reg S, S274 & 275 of Singapore SFA
Tenure: 3 Years
Initial Price Guidance : 5.15%
Issue Size: SGD [TBD] million
Payment: Semi-annual, actual/365 (fixed)
Details: SGD250K/MTN Programme/Singapore Law/CDP
Listing: SGX-ST
Credit Highlights:
– Oxley expects to recognize approximately S$2.86bn worth of revenues over the next six years (c.S$2.4bn over the next three years).
– Oxley delivered its most impressive set of results yet, with net profit attributable to shareholders soaring to a record $250.8 million for the three months ended 30 September 2013 (“1QFY14”), compared to $6.6 million reported in the previous corresponding period (“1QFY13”).
– Short investment to sales cycle with projects launched within a year from site purchase. Completion of development projects in relatively short periods.
– Extensive network of partners. Strong relationships with contractors, financiers and consultants help the group bring projects to the market faster than its competitors.
– Overseas opportunities for its next phase of growth – In November 2013, acquired adjacent parcels of land in London’s Royal Docks area, known as the Royal Wharf. Acquired at a price of £200 million, these sites yield an effective gross area of approximately 363,000 square metres, which Oxley intends to develop into more than 3,000 residential units, along with a mix of commercial, retail, leisure and educational facilities.
So its market cap doubled in a year because its profits rose from 6 mio to 250 mio for the quarter which is MORE THAN CAPITALAND AND CDL COMBINED. (No wonder CDL is complaining)
It is also financially leveraged at 11.3 times which means that for a company of SGD 1.3 bio, they have total assets of 11.3 times ! which is HIGHER THAN UOB BANK and more than >70% higher than HL Finance and Sing Finance.
Why is it ok for a bank to have high financial leverage ? Because they are deposit taking institutions.
So Oxley is funding all their assets with just PURE DEBT which would bring a huge smile to every shareholder’s face. And bondholders BETTER HOPE AND PRAY that their “expects to recognize approximately S$2.86bn worth of revenues over the next six years” is an underwritten statement.
They have grown in a big hurry and are borrowing like mad, with London now their biggest gamble. Already in China, Cambodia and Malaysia, their London foray is their largest gamble to date which they better build and sell fast because of the rubble of looming taxes and credit squeeze that the British government may be hatching.
And another acquisition of a prime freehold site in KL just last week.
This issue will sell as private bankers are getting another nice ang pow to market it and DBS is trying to buy over Soc Gen private bank’s asian unit. Just do not go around asking for bids because I do not think many banks like to buy bonds of companies that borrow more money than them.
Good luck !
The leverage is scary stuff and @ just 3y/5.5%. I hear books are full. Bankers called me early today to try and sell this. Sigh….
Hopefully they repeat with another brilliant quarter, otherwise their short end bonds will be hit first with refin risk.
Hi tradehaven, thanks for sharing your insightful views on the new Oxley bond issue. Thank you so much.
May I just seek your advice on this: the price of the retail tranche of the OCBC Cap 5.1% preference share traded in sgx went down quite significantly recently. Are there any special reasons for this? After the payment of coupon in Sept, the price has slowly went up from mid 106 to to 108 region last mth. But recently, it went down to 106 region. The other retail tranche of Perps/pref share eg. Hyflux or Gentings seems to be doing quite well. Hope Sir can share your views.
Thank you so much. Hear from you.
Because the capital adequacy rules of Basel 3 only applies to banks.
May I also ask, in your view is there fairly high chance OCBC will redeem the retail tranche at par soon, say next year, b4 the first call date in 2018?
Thank you so much again.
I am guessing yes although the call date is in 2018.
The computation is 10% per year which means by 2018, only 50% of that issue will qualify for capital adequacy which is a pain.
Many thanks for sharing your useful insights. I am wondering will they probably just redeem at 100 or will issue a ‘replacement’. Hope you can share some advice for holders of the OCC 5.1% retail (not OTC) tranche PS. It is trading at 106 now and I didn’t get most of them at IPO, so it will incur a loss if they redeem at 100. 🙁
Do you have any idea how many outstanding OCBC debts are there that doesn’t satisfy the basel 3? I am wondering what will be the ‘sequence’ they redeem it. Will OCC 5.1 probably be one of the first? Getting really worried about it. 🙁
Depends on when they redeem which I am guessing should be soon if they want to ride on this perpetual bond euphoria in Singapore.
OCBC is most astute – very hard to find a bargain there.
Thanks for the explanation again. Am I probably correct to say if they redeem it, they’ll probably let the current investors do a ‘switch’ like the way DBS does? Or will they just redeem it at par and pay me back 100 the way FNN does when they redeem their 2015 and 2016 bonds etc recently? Thank you so much again.
Honestly, I will not even guess.
It would appear that a “switch” is a good idea because they would need to replace the capital anyway. It is entirely their prerogative and we will have to check the prospectus of the OCBC Capital Corp 2008 5.1% callable 09/2018 if they had included a clause for an early redemption if the bond failed to entirely qualify as tier 1 capital. There is a possibility that the clause may be absent given that this bond was issued back in 2008 and so a different approach to redemption may be necessary.
And I would not compare this to FNN which is a redemption due to a material change in control of core assets/business.
Hi Oldfolk,
I have appended some useful information for you re matter in the Forum under SGD Bonds.
Good luck !
Hi tradehaven, deeply appreciated your explanation and information in Forum under SGD bonds. I will look out for any updated news in the forum SGD bonds should you so happen to have so I can be mentally prepared what will possibly happen. Thank you so much