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Oxley Holdings Ltd Is Making A Billion-Dollar Investment In China: What Investors Should Know

Singapore companies appear to have a big appetite for investing in the Chinese city of Chongqing. In 2015 alone, some S$7.7 billion in investments from Singapore poured into the city, one of the fastest-growing in China.

Real estate developer Oxley Holdings Ltd (SGX: 5UX) is one Singapore-listed company that has recently decided to venture into Chongqing as well.

The big deal

Earlier this month, the Business Times revealed that Oxley has inked a deal to develop an integrated medical hub in Chongqing. The project, named Lijia Health City, has an estimated cost of RMB5 billion, or S$1 billion.

For perspective on the scope of this project for Oxley, the company’s most recent financials (as of 30 June 2016), show total assets of S$4.73 billion.

Lijia Health City is not made up of just hospitals and medical centres – it will also include high-end residences, serviced apartments, research centres, and more.

Oxley’s executive chairman and chief executive Ching Chiat Kwong, was initially “slightly worried and sceptical” about the Chongqing project. But, he’s more upbeat now.

He estimated that Oxley could recoup its initial investment in the project in as little as five years. He added that such projects would “conventionally” be “done over eight to 10 years,” but he is optimistic that Oxley’s Chongqing investment can be “realised and recovered in five to seven years.”

The bigger deal

Investors may be interested to observe how Oxley will finance this big project in Chongqing. The company has S$3.77 billion in total liabilities at the moment, of which S$2.63 billion come from borrowings. Oxley currently has only S$0.55 billion in cash.

It’s also worth noting that the company’s equity is S$965 million right now, which is roughly the same as the size of the Lijia Health City project.

Oxley has other projects in China. It has a residential development project in the Anhui Province which was launched in May 2014 and another mixed-used development in Hebei Province. But, Oxley only holds minority stakes of 10% and 20%, respectively, in them. The big question now for Oxley would be whether it can execute the Chonggqing project well.

A Foolish summary

Oxley will be undertaking a billion dollar project in China. It’s huge relative to the size of the company, but there are also risks to note.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.