Oxley retail bonds review (5%)

There has been much hype on this Oxley retail 5% bond, spanning over 4 years maturity. However, it is unrated and that means I can't rely on any Moody's analysis to discern whether it is a good deal a not.

I have to analyse on my own then. After studying its financial report and ripping it apart, below are my takeaways and humble thoughts.

Before I go to the financial jargon, I need to express that this is only my opinion and may not bear any truth at all. Analysis and thoughts are of personal opinions only. For every statement I make here, I will put 'I think'. (but it is up to you to discern what I say correct anot ;P)

1.Profit before tax dropped from FY14 to FY15 by a whopping approx. 62%

FY 2014: $377,367m
FY 2015: $142,705m
Oxley holdings has achieved very impressive profits in Year 2013 and 2012, when the property market in Singapore was booming.
However, after the cooling property measures were implemented, many developers are facing a lackluster response in its properties. It is no surprise that Oxley was badly affected by it too.
Oxley has plans to expand overseas aggressively instead but looking at its financials, I do not find them promising. (to explain later)

2. Marketing expense increased 99%

I think when you increase your marketing expenses by 99% but then your results decrease by 62%, it means:
A. Your marketing strategies CMI. (cannot make it)
B. You are not getting the response that you want, i.e, demand is not that good.
I think that it is option B because Oxley's marketing agents are mostly from Huttons and Huttons really produce impressive results in other properties previously. When you spend so much more on marketing yet get poor results, it just shows that your products are not as good.

3. Debt ratio and D/E ratio is high

I think it is high.
Debt ratio (Total liabilities/Total assets) = 0.85 approx
The industry encourages standard of about (0.3~0.6) only.

Debt/equity ratio (Debt/equity)= 5.807 approx.
Other companies are <1.......

I think Oxley has too much leverage and it is risky.This means that if their business fail, I think I will be in queue 1,000,000 to get back my money lor omg. (Just joking, queue no. is a fake anyhow say number)

Look at its fixed notes it previously issued:

I think those that were issued in Year 2013 were for its projects in Y2013/Y2014 which did receive resounding success. Oxley should be able to pay them.

But for notes issued now, the money I think will be used for its overseas projects venture moving on but this leads me to the next point.

4.No confidence in Oxley's overseas projects venture

Look at this:

Forget its FY2015 poor performance. I think future plans are very important and the strategies form the crux of whether the company is a good investment a not.

Looking at this table, I really do not think Oxley overseas projects are promising.

A. Projects in Cambodia
I go to Cambodia- Phnom Penh every single year (I'm not a Cambodian btw) and I have some close friends there. There is an association there which I am committed too and has a close relationship with. As such, I think I have some knowledge to really say how Phnom Penh is like. And this is what majority of Phnom Penh is:

1. Mud & uneven roads
2. Slums
3.Corruption
4. Poverty
5. Main language of the people is Khmer
6. More well off people work as factory garment workers
7. Less well off people open shops infront of their living area and sell the same stuffs that other shops sell too.
8. Children not wearing underwear and running around
9. many many other scenario depicting a 3rd world country

Phnom Penh has a very very long way to go for foreign investments. And to build high rise condominiums and to attract expats to stay there, well, I think, more likely they will become AirBnb.

I do not think that Oxely's property developments in Phnom Penh are promising although their first project there did receive a good response.

B. Projects in Malaysia
Exchange rate of those people who bought properties in Malaysia during year 2013 when the market is booming there: SGD 1: MYR 2.65

The exchange rate now: SGD 1: MYR 3.05

Exchange rate in future: ????

With a very questionable government, weak currency, poor security, I think the property market there is certainly not as attractive as in year 2013. As such, I do not think that projects there will receive good response.

Also, Setia Berhad, the leading property developer there, has much more competitive advantage in its home land as compared to Oxley.

Given that Singapore's developers are facing a weakening demand here, and Oxley's prime focus is shifting to overseas with such projects in such countries, I do not have the confidence in their ventures.

5. You can get 5% yield elsewhere too
5% yield capital guaranteed by AAA credit rating from Moody's is a must grab.

But when it is unrated and it has poor future strategies, then I think it will be better if you put your money into blue chip stocks or diversified reits- Probably 6% over 7 years horizon, your money is safer.

Conclusion

I will not buy Oxley's retail 5% bonds because the risk does not justify the returns.