CGS-CIMB Research analysts William Tng and Izabella Tan have undertaken a preliminary assessment of OKP Holdings 5CF in an unrated report.
Founded in 1966, OKP was listed on the Singapore Exchange in 2002. The transport infrastructure and civil engineering group’s specialties include the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges and roads, the analysts note.
OKP’s three business segments are construction, road-related maintenance as well as rental income from its diversification into property development and investment. Construction contributed about 69.6% to total revenue in FY2022.
In their assessment, Tng and Tan highlight that a road viaduct under construction had collapsed at the Pan-Island Expressway on July 14, 2017, killing one worker and injuring 10 others. The viaduct project was clinched by OKP in 2015 for $94.6 million, upon which the company engaged CPG Consultants to provide design services.
On March 6, 2023, OKP announced that it succeeded in its arbitration suit against CPG, resulting in CPG being ordered by the arbitration tribunal to pay $43.8 million to OKP. The company expects the payment to be accretive to its FY2023 net profit compared to the loss of $1 million in FY2022.
OKP’s book value per share as at FY2022 was 38.7 cents, according to its FY2022 annual report. “Had the $43.8 million gross payment been recorded in FY2022, its adjusted FY2022 book value per share would have been raised 36.9% to 53 cents,” Tng and Tan add.
OKP’s FY2022 loss was due to litigation costs relating to the 2017 accident as well as increased costs of labour, materials and subcontractors. The company expects its gross margins to improve in FY2023 from higher tender prices for contracts secured post-Covid-19 pandemic as well as stabilising costs, the analysts note.
The company is also considering paying a higher dividend in FY2024. Tng and Tan points out that the company has consistently paid dividends of at least 0.7 cents per share each year since FY2015.
Lastly, the CGS-CIMB analysts also highlight that OKP had secured a 36-month $95.9 million contract from the Land Transport Authority for 1Q2023 to 1Q2026.
As at 1.46pm, shares in OKP are trading flat at 24 cents.
