Oxley Holdings

VOYAGE RESEARCH, Aug 25

OXLEY Holdings Ltd (Oxley) posted full year revenue and PAT (profit after tax) of S$1.07 billion and S$307 million, forming about 92-93 per cent of our full year forecasts. Over the last few months, the company announced:

• the launch of The Bridge in Cambodia, which is approximately 81 per cent sold,
• higher sales in Royal Wharf Phase 1 which is almost fully sold,
• more units sold in Singapore projects despite the slow market,
• the appointment of Accor for the hotel development along Steven Road and
• the termination of some Malaysian MOU (memorandum of understanding) agreements as some of the conditions were not met.

The robust overseas projects sales have prompted us to be more optimistic about the company's outlook. The company is likely to launch the phase 2 of Royal Wharf and Naga 2 project in Q4 2014 as Oxley rides on the sales momentum. We continue to expect Oxley to finish selling its remaining projects in Singapore and the hotel development along Steven Road will generate valuation surplus of about S$360 million. Recommend "invest" with an intrinsic value of S$0.885.

INVEST

Riverstone Holdings

Voyage Research, May 8

RIVERSTONE Holdings (Riverstone) recorded another set of healthy results on the back of impressive gross margin and effective cost control. We revised the FY14 revenue downwards in view of the lower production due to the water rationing and lower selling prices due to weaker raw material prices.

We also lowered our market risk premium slightly in view of the management's moves to increase sales. Maintain "invest" with an intrinsic value of S$0.925.

INVEST

Roxy-Pacific Holdings

Voyage Research, May 7

ROXY-PACIFIC Holdings Limited (Roxy) reported a 27 per cent jump in net profit for Q1 FY2014. We view the results as largely in line with expectations and reiterate that the company will likely benefit from the completion of Centropod@ Changi and its Hong Kong project in FY2014. Quarterly results do not yet reflect contribution from these projects, which are accounted for only on completion or handover.

Moreover, 59 Goulburn Street in Sydney is also likely to raise the company's investment income in H2 2014.

Roxy pre-sold S$19.6 million of its Singapore projects during the current reported period of Feb 7 to April 24 (77 days) or S$255,000/ day, compared to S$23.5 million during the Oct 30, 2013 to Feb 6, 2014 period (100 days) or S$235,000/day. Roxy's pre-sales in Singapore can thus be viewed as consistent or slightly better in Q1 FY2014 than in Q4 FY2013.

We also understand that Roxy sold two more units in Jade Residences during the weekend after it released its results, which were not reflected in the reported numbers.

Other than sales in Singapore, the company also sold four more floors at its 30 per cent-owned Hong Kong project, which raised attributable pre-sales from about S$95 million in February to S$137.7 million as of April 24.

As a result of the company's efforts to diversify geographically and to encourage local pre-sales, progress billings to be recognised as revenue from Q2 FY2014 to FY2017 have risen from S$922.4 million as of end-FY2013 to S$1.001 billion as of end-Q1 FY2014.

Eon Shenton, 20 per cent owned by Roxy, changed its main contractor and this resulted in the reversal of an estimated S$5.5 million of attributable revenue recognised. The project is 97 per cent sold and we expect revenue recognition to resume its pace once the new contractor ramps up work.

The company's Q2 results will shed more light on progress at this project. For now, we maintain our forecasts and valuation in this report and note that the company continues to sell its units in Singapore progressively and is at the same time shifting part of its portfolio into overseas projects.

"Invest"; intrinsic value is S$0.720.

INVEST

Roxy-Pacific Holdings

Voyage Research, Feb 11

WE are surprised by news that Roxy-Pacific Holdings (Roxy) has successfully divested itself of part of its Hong Kong property for a reported gross profit of close to S$60 million, translating to about 4.9 Singapore cents of value generated within one month of the completion of the investment. Roxy is scheduled to announce its FY2013 results tomorrow, which we expect to be impressive because of lump-sum contribution from commercial project WiS@Changi.

The transaction, in our view, is a high positive, as the quantum of profits involved means that the company will be in a strong position to deliver further growth in FY14, thus "bucking the trend" and allaying concerns about the local market affecting the performance of companies.

Roxy's Hong Kong property investment comprises a 30 per cent stake in 21 floors of a property in Causeway Bay. The offering is unique in the sense that the 14 floors were sold with one strata title of average GFA (gross floor area) of 4,718 sq ft per floor, for retail use, thus targeting large retailers (or landlords wishing to split each floor into smaller units).

The space is used as serviced apartments. We ask (a) whether value was created from the conversion of use from residential to retail, as retail space is generally more valuable and (b) whether there is a lack of large retail units in the surrounding prime area. This transaction shows that value can still be generated out of well-selected investments.

Based on the reported selling prices, we estimate that the 14 floors will yield proceeds of about HK$1.9 billion, therefore paying back to the owners the consideration of HK$1.8 billion. We refrain from adjusting our forecasts and valuation, pending further information from the management, such as plans for the remaining seven floors, at its quarterly results briefing in a few days from now.

On the whole, the transaction highlights Roxy's property selection expertise and financial strength and is a signal that the property sector can still be highly profitable given the right moves.

We further reiterate our positive confidence in Roxy in the context of its low level of unsold inventory in Singapore and its track record in creating value . . . Intrinsic value: S$0.685.

INVEST

CNMC Goldmine Holdings

Voyage Research, Jan 15

CNMC Goldmine Holdings Limited announced last month that: a) it has formed a joint venture with the Perak state government to explore tin mining, and b) it will be paying its maiden dividend of 0.1 Singapore cent per share on Jan 20. We reiterate our highly positive outlook on CNMC on the back of increased production following the completion of leaching pad 2 in September 2013. Maintain "increase exposure" (intrinsic value at S$0.800).

We recall that CNMC successfully commissioned its second gold de-absorption plant last November, following record gold pours of 2,131 oz (or 66.3 kg) of gold dore bars from the new plant. In contrast, the company produced 81.5 kg (or 2,620 oz) of gold dore bars in October 2013. The new plant tripled overall gold de-absorption capacity to three tonnes per cycle to match this year's one million tonnes of ore heap leaching capacity.

Spot gold currently trades at US$1,252/oz; it remains above the input gold price of US$1,200/oz, which we applied towards our forecasts and valuation of CNMC. We are unfazed by lower gold prices, as falling unit costs and higher production are expected to more-than-offset price declines. Moreover, the decline in gold prices seemed to have slowed since Q3 2013 (down 2.7 per cent from end-Q3 2013 to Jan 14, 2014). CNMC reported an impressive low all-in sustaining cost of US$566/oz in Q3 2013. We remain optimistic about CNMC's Q4 2013 results and 2014 outlook.

The joint venture with the Perak state government-owned Menteri Besar Incorporated (Perak) reflects CNMC's long-term strategic planning to develop other resources, while leveraging on its experience and infrastructure in Malaysia.

For instance, the Kelantan CNMC office can support both the Sokor and Darul Ridzuan sites, thus reaping further synergies. From the technical perspective, there are similarities in how gold and tin ores are processed for their respective metals. We like the cooperation with the Perak state government, following CNMC's relationship with the Kelantan state government. This venture, if successful, will be evidence of the company's ability to grow beyond its current Sokor concession into a major mining company in Malaysia ...

Another positive development is CNMC's decision to give out its maiden dividend, which is a signal of stability and confidence in future production and cash flows. We expect CNMC to fund future exploration activities in Kelantan and Perak from cash flow generated from gold sales, while reserving some cash for shareholders.

INCREASE EXPOSURE

AIMS AMP Capital Industrial Reit

Voyage Research, Nov 26

AIMS AMP Capital Industrial Reit (AA Reit) has announced the proposed acquisition of a 49 per cent indirect interest in Optus Centre in Australia for about S$215 million.

The asset is a secure A Grade business-park office with a total lettable area of 84,194 sq m. The current rental rate is approximately A$290/sq m with fixed annual escalation of 3 per cent.

The asset is fully let to Optus Administration Pty Ltd and guaranteed by Singtel Optus Pty Ltd. The weighted average lease term of the asset is about 8.6 years, with an additional five-year renewal option.

The stake is purchased near the open-market value of S$215.4 million. The entire deal will be debt-financed, with a new five-year term loan facility of A$110.7 million and S$120 million from an existing SGD/AUD revolving credit facility.

Positive terms of the deal:

1) Quality tenant with long-term lease and built-in rental escalation;

2) Reasonable NPI (net property income) yield of about 7.9 per cent;

3) DPU (distribution per unit) accretive and will boost DPU by about 0.58 Singapore cent annually.

However, we are mindful of the leverage ratio, currency risk and unnecessary diversification. In particular, the borrowings/total assets will trend towards 41 per cent by FY2016 if we were to take into consideration AA Reit's existing project pipeline.

Management has commented that they have financial flexibilities in place (some of their assets are not collateralised) and part of the currency risk is hedged.

We retain our FY14 forecast dividend payout of 11 Singapore cents per share and increasing the FY15 forecast and FY16 forecast dividend payout by 0.6 Singapore cent. We also increase the cost of equity to 8.5 per cent to account for the additional risks. Maintain "Invest" with S$1.73 intrinsic value.

INVEST

CNMC

Voyage Research, Oct 29

CNMC Goldmine Holdings looks set to produce a very strong set of Q3 results, following announcements of record gold dore production of 1,360 oz in July and 3,420 oz in September 2013. In contrast, H1 2013 gold production was only 2,073 oz. CNMC's share price of S$0.235 as at Oct 28, 2013, suggests that the market may yet to have fully priced in the growth in CNMC's production (intrinsic value: S$0.800).

Assuming merely 1,000 oz of gold dore output in August 2013, Q3 FY2013 gold dore output may be more than 5,700 oz (or about 5,200 oz of gold, assuming 90 per cent purity). Such production in turn translates into US$1.5 million to US$2.6 million of net profit for CNMC based on a per ounce net profit of US$300 to US$500. Conversely, CNMC's net profit was US$0.1 million in Q2 FY2013, on 1,388 oz of gold output.

There is some upside risk in the estimation of Q3 net profit as unit costs have most likely been driven lower by economies of scale.

CNMC further reported recently that it produced 1,526 oz of gold dore in a single gold pour in October 2013, suggesting that the strong performance in Q3 is being carried forward into Q4. Our calculations indicate that CNMC need only produce another 3,350 oz of gold in Q4 to meet our full-year forecast of 12,000 oz - an achievable target given recent output levels, but subject to weather considerations.

According to CNMC's announcements, growth was driven by factors such as technical enhancements to the production process, more effective ore selection to yield higher grade ore for leaching and growth in operating leaching capacity.

CNMC's first leach pad of 70,000 tonnes of ore per leach cycle was commissioned on Dec 30, 2012. The second leach pad of 140,000 tonnes of ore per leach cycle commenced production in September 2013. A third leach pad of 70,000 tonnes per cycle is being constructed to achieve estimated leaching capacity of one million tonnes of ore per annum.

INCREASE EXPOSURE

Cordlife Group

Voyage Research, Sep 5

YESTERDAY, Cordlife Group (Cordlife) announced the proposed acquisition of a 19.9 per cent stake in StemLife Berhad (StemLife) at about RM29.6 million, which will be fulfilled via the issuance of 8 million Cordlife shares and RM2.85 million cash. The consideration is arrived at after taking into account StemLife's cash balances of RM76.8 million as at end-June 2013, freehold land with an original book value of RM6.9 million and its fundamental prospects.

We see several benefits in this acquisition. First, it will enable Cordlife to expand its footprint into Malaysia and, potentially, Thailand. There may be an opportunity for a Cordlife-StemLife collaboration; they can cross-sell cord blood banking services in both nations and offer a different tier of services.

More growth will also be generated following Cordlife's intention to extend its product offerings in the mother-child segment. StemLife will be able to improve its gross margin as it can now ride on Cordlife for bulk purchasing and adopt more effective and advanced systems.

Most of the growth prospects will be gradually realised over the years. Hence, we are upping our terminal growth rate to 5.5 per cent from 5 per cent and assuming that StemLife will contribute S$0.5 million attributable profit in FY2014 and S$0.9 million profit in FY2015. Our model reflects a revised price of S$1.60 per share. Maintain "invest".

INVEST