OKP Holdings 5CF has secured a contract worth $14.0 million from the Public Utilities Board (PUB) for drainage improvement works.

 

The 33-month contract for the improvement works at several locations islandwide, including industrial as well as public and private residential areas, is expected to commence Jan 2, 2024 and be completed by Oct 1, 2026.

 

OKP&rsquo s wholly-owned subsidiary Eng Lam Contractors will undertake the improvement works to roadside drains in the Eng Kong Place, Neram Crescent and Tai Seng Drive areas. 

 

Other ancillary works include trial trenching, diversion of underground services, installation of sheet piling for drains and culverts, as well as coordinating with services agencies to divert services affected by drainage improvement works and affected underground water pipes.    

 

&ldquo This new contract reaffirms the trust and confidence in our drainage specialisation and expertise. We will continue to focus on the smooth delivery of all our drainage projects, by undertaking them safely, efficiently and sustainably,&rdquo says group managing director Or Toh Wat says.

 

With the new contract, OKP&rsquo s current net construction order book has increased to $610.4 million, with projects extending to 2026.

 

OKP Holdings&rsquo 5CF 0.00% wholly-owned subsidiary Eng Lam Contractors has been awarded a $12.7 million contract by the Land Transport Authority (LTA) for the ad-hoc improvement of road related facilities, road structures and road safety schemes for Singapore&rsquo s Western sector.  

 

The 18-month contract, which commenced on Oct 31 and is expected to be completed by April 30, 2025, will see Eng Lam Contractors involved in the improvement and upkeep of road and cycling paths.

 

&ldquo We feel encouraged to have secured this contract from LTA which is an endorsement of our core competency and capabilities, and we are committed to the smooth delivery of this project,&rdquo says Managing director Or Toh Wat.

 

OKP&rsquo s fourth contract from LTA follows a separate 18-month contract worth $188.3 million for the construction of a new cycling path network in seven towns islandwide. 

 

The two earlier LTA contracts include a 36-month contract worth $95.9 million for the maintenance of roads, road-related and commuter-related facilities along the South Eastern sector secured in February 2023 and a 48-month contract worth $100.3 million for the construction of covered linkways and cycling paths at new MRT stations.

 

As at Dec 11, OKP&rsquo s construction order book stands at $596.4 million, with contracts extending till 2026.

 

OKP Holdings has won a contract worth $11.7 million from PUB for drainage improvement works at several locations islandwide.

 

Works related to the contract will be done by Sept 2026.

 

" We are encouraged by the trust and confidence shown in our drainage/sewage specialisation and expertise and will focus on the smooth delivery," says Or Toh Wat, the company' s group managing director.

 

With this contract win, OKP now has a total orderbook of $583.7 million.

 

OKP shares last changed hands at 21 cents, up 31.25% year to date.

 

At this price, OKP shares are valued at 1.93x historical earnings.

 

On August 28, OKP Holdings announced it was awarded $188.3 million contrant by the Land Transport Authority (LTA) for the construction of a new Cycling Path Network (CPN) in seven towns islandwide. This encompasses Geylang, Hougang, Kaki Bukit, Marine Parade, Potong Pasir, Sengkang and Serangoon, under the next phase of LTA&rsquo s islandwide Cycling Network programme.

 

OKP' s subsidiary, Or Kim Peow Contractors (Private), will be involved in the construction, supervision and completion of cycling paths and shared paths, including associated works such as reconstruction/ reinstatement of infrastructure (such as footpaths, covered linkways, retaining walls, drains, ramps, staircases, signages and precinct markers), planting/ transplanting/ removal of trees and other landscaping, as well as all other ancillary works.

 

As at August 28, OKP' s net construction order book amounts to $572 million, with contracts extending till 2026.

 

In 1HFY2023 for the six months to June 30, OKP recorded a net profit of $35.6 million, 29.6 times higher &ndash or 2,899.7% - higher than the earnings of $1.2 million in the same period the year before.

 

Revenue rose by 30.6% y-o-y to $70.0 million mainly due to higher contribution from the construction and maintenance segments and partly offset by lower rental income. Gross profit, however, fell by 58.6% y-o-y to $2.1 million as cost of sales rose. Gross profit margins also fell by 6.4 percentage points y-o-y to 2.9%.

 

Other gains surged by 4,395.1% y-o-y to $45.1 million mainly due to higher interest income from higher interest rates from bank deposits, the arbitral award of $43.8 million in relation to the contract 449A worksite incident, as well as a decrease in the loss on foreign exchange (forex) of $0.6 million from the revaluation of assets and liabilities denominated in Australian dollars (AUD) to Singapore dollars (SGD). This was partly offset by lower government grants.

OKP Holdings 5CF -2% has reported earnings of $35.6 million for the 1HFY2023 ended June 30, 29.6 times higher &ndash or 2,899.7% - higher than the earnings of $1.2 million in the same period the year before.

 

The earnings surge was attributable to the higher revenue and other gains.

 

Earnings per share (EPS) stood at 11.59 cents on a fully diluted basis.

 

Revenue rose by 30.6% y-o-y to $70.0 million mainly due to higher contribution from the construction and maintenance segments and partly offset by lower rental income.

 

Gross profit, however, fell by 58.6% y-o-y to $2.1 million as cost of sales rose. Gross profit margins also fell by 6.4 percentage points y-o-y to 2.9%.

 

Other gains surged by 4,395.1% y-o-y to $45.1 million mainly due to higher interest income from higher interest rates from bank deposits, the arbitral award of $43.8 million in relation to the contract 449A worksite incident, as well as a decrease in the loss on foreign exchange (forex) of $0.6 million from the revaluation of assets and liabilities denominated in Australian dollars (AUD) to Singapore dollars (SGD). This was partly offset by lower government grants.

 

As at June 30, the group&rsquo s order book stood at $383.7 million with projects extending till 2026.

 

An interim dividend of 0.5 cents was declared for the period and payable on Sept 27.

 

Cash and cash equivalents stood at $65.8 million as at June 30.

&ldquo We are pleased with our performance for 1HFY2023 which was bolstered by the recovery in the local construction sector. With a positive outlook of steady construction demand from both the private and public sectors, along with a healthy pipeline of construction projects, we remain vigilant in leveraging on our core expertise to tender for projects, while maintaining prudence in our capital structure and finances,&rdquo says Or Toh Wat, group managing director.

 

&ldquo Amidst the prevailing macroeconomic uncertainties and elevated material prices, we remain even more focused on our strategy to diversify our earnings base and build up our base of recurring income. Furthermore, OKP will continue to explore strategic partnerships with experienced partners, especially for our property development and investment business, both locally and potentially in the region, to ensure the continued delivery of value to stakeholders,&rdquo he adds.

 

CGS-CIMB Research analysts William Tng and Izabella Tan have undertaken a preliminary assessment of OKP Holdings 5CF 0.00% in an unrated report.

 

Founded in 1966, OKP was listed on the Singapore Exchange in 2002. The transport infrastructure and civil engineering group&rsquo s specialties include the construction of airport runways and taxiways, expressways, flyovers, vehicular bridges and roads, the analysts note.

 

OKP&rsquo 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&rsquo s book value per share as at FY2022 was 38.7 cents, according to its FY2022 annual report. &ldquo 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,&rdquo Tng and Tan add.

 

OKP&rsquo 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.