Excerpts from CGSCIMB report

OKP Holdings (SGX: 5CF)

• OKP is a transport infrastructure and civil engineering group in Singapore.
• OKP announced that it was awarded c.S$43.8m in an arbitration. It also guided for better margins in FY23F and possibly higher dividend in FY24F.
• As at Feb 2023, OKP had a net orderbook of c.S$454.1m, the highest in its history, according to its FY22 Annual Report.

A transport infrastructure and civil engineering group in Singapore

Founded in 1966 and listed on the SGX in 2002, OKP is a transport infrastructure and civil engineering group in Singapore. According to OKP’s 2022 Annual Report, it specialises in the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges, and roads, among other things. OKP also carries out maintenance works for roads and road-related facilities as well as provides building construction-related works. Its three business segments are:

• construction;
• road-related maintenance
•  rental income from its diversification into property development and investment.

Construction contributed c.69.6% to total revenue in FY22, as per its 2022 Annual Report.

OKP Holdings succeeded in arbitration; c.S$43.8m one-time gain in FY23F

On 14 Jul 2017, a road viaduct under construction collapsed at the Pan-Island Expressway (PIE) to the Tampines Expressway (TPE) in Singapore, killing one worker and injuring 10 others, according to OKP’s announcement on 14 Jul 2017. OKP had clinched the viaduct project in 2015 for S$94.6m and engaged CPG Consultants (CPG) to provide design services for it. OKP announced on 6 Mar 2023 that it succeeded in its arbitration suit against CPG and that CPG was ordered by the Arbitration Tribunal to pay c.S$43.8m to OKP. OKP expects the c.S$43.8m payment to be accretive to its FY23 net profit compared to the loss of c.S$1.0m in FY22. OKP’s BV/share as at FY22 was c.38.7 Scts, according to its FY22 Annual Report. Had the c.S$43.8m gross payment been recorded in FY22, its adjusted FY22 BV/share would have been raised 36.9% to c.53.0 Scts.

Margins could improve in FY23F; ongoing contracts with LTA

Despite registering record-high revenue in FY22, OKP slipped into a net loss of c.S$1.0m due to litigation costs relating to the abovementioned 2017 accident. In addition, increased costs for labour, materials, and sub-contractors, as explained in the minutes of its 21st Annual General Meeting (AGM) published on 5 May 2023. OKP expects its gross margins to improve in FY23F from higher tender prices for contracts secured post the Covid-19 pandemic as well as stabilising costs, according to the 21st AGM minutes. On 16 Feb 2023, OKP announced that it secured a 36-month S$95.9m contract from the Land Transport Authority (LTA) for 1Q23 to 1Q26F.

OKP Holdings could potentially pay higher dividends in FY24F

OKP has consistently paid dividends of at least 0.7 Scts/share each year since FY15 and management said it may consider paying a higher dividend in FY24F, according to its 21st AGM minutes. OKP is trading at 0.62x CY22 P/BV relative to peers, which are trading at an average of c.0.41x CY22 P/BV

You can find the full report here and the company website here.