OKP Holdings Limited -

Thank you very much for the questions and the opportunities to clarify them. We hope you have a better understanding of our business through this online exchange.

Your questions will be reposted in blue followed by our replies in black.

Rgds,
The Management Team
OKP Holdings Ltd

Dear Sun Zhongzhe, you wrote:

In announcement on Dec 14, 2023, it was mentioned that the group's current net construction order book increased to S$610.4 million. However, FY2023 results shows "as of 31 December 2023, the Group's order book stood at S$518.6 million", could you clarify why there is a difference of $90 million?

The S$90 million variance in the order book amount was due to revenue recognition, resulting in a decrease in the order book amount.

Dear Yeo Keng Huat, you wrote:

Does the management still intend to sell 69 & 71 kampong Bahru shophouses? They were placed on the market last year.

The shophouses were listed on the market last year in response to rising property valuations and to enable us to assess market interest and potential appreciation. However, considering the recurring income generated and potential appreciation, we have decided to retain both shophouses. Over the years, both properties have consistently generated recurring income, enhancing our income resilience.

I understand last year that the upper floors of these shophouses might been vacant. Have the management managed to lease out the entire two units?

We have leased out the entire two units.

The property at 6-8 Bennett Street is occupied by the State Government and Fortescue Metals. The latter has leased a new office space in Perth and will be moving their headquarters to the new location. Will they be moving out from your property? When is the lease expiry? If they are moving out, have the management found a replacement tenant?

We will normally commence talks with our tenants two months before the lease expires.

We are currently actively marketing the spaces to secure new tenants and maximise occupancy. The good quality improvements and desirable features such as the scenic Swan River view and spacious frontage have greatly enhanced the overall appeal and value of the property.

An impairment of $4.2mil was made to the other receivables? Does this loss result from the Essence and Phoenix Residences? Both projects have been fully sold.

The $4.2 million impairment made in respect of other receivables related mainly to the loan extended to an associated company and was not related to the loss from The Essence and Phoenix Residences.

Shouldn't equity holders (JV partners) take the full cut from any losses instead of creditors?

As stated above, the impairment loss related to the loan extended to the associated company and not any losses from the development property. The recognition of $4.2 million impairment loss on the loan extended to the associated company is based on an assessment of the expected credit loss.

Is the fair value gain of $4.9mil on investment property attributable to the Singapore or Australia properties?

The $4.9 million fair value gain is mainly attributable to Singapore properties, reflecting their strong performance and market appreciation.

Our property investments in both Singapore and Australia had yielded positive results and demonstrated resilience, contributing to our recurring income streams. This resilience underscores the strength of our portfolio to deliver sustainable returns to our stakeholders.

There is an outstanding loan totaling $24mil, as at year end, which was unchanged from 30 June 2023. Presumably, this results from the loan taken out to finance to purchase the property at Bennett Street. What is the rationale for keeping the balance in light of the high interest rate environment? Is it for hedging against unfavourable forex movements? Is there any financial constraint on your JV partner affecting their ability to pay down the loan?

Our loan balance decreased by approximately $1 million to $24 million as at 31 December 2023 from $25 million as at 30 June 2023. Repayments are made quarterly to ensure progress in reducing our debt through prudent cashflow management.

At the same time, we are reserving funds for property refurbishments to enhance their value and potential capital appreciation, supported by a healthy balance sheet of free cash and cash equivalents of S$81.7 million. This strategic approach aligns with our commitment to prudent financial management as well as strengthening our foothold property ventures to deliver long term value to our stakeholders.

Directors' renumeration increased substantially last year due to bonuses paid. (both in 1H and 2H 2023). As part of good Corporate Governance, shouldn't management pay out higher dividends to share the fruits more equitably among the different stakeholders? As management also owns the majority of the company's shares, they should also stand to gain from any higher dividends declared.

To reward our loyal shareholders for their continued support, the Company had previously paid an interim dividend of $0.005 per share on 27 September 2023 and the Board has now recommended a final dividend of 0.7 Singapore cent per share and a special dividend of 0.8 Singapore cent, totaling to 1.5 Singapore cents. This works out to a total dividend of 2.0 Singapore cents per share for FY2023 as compared to 0.7 Singapore cent for FY2022.

Dividend was paid for FY2022 notwithstanding that the Company had incurred a loss per share (basic) of 0.33 Singapore cent in FY2022.

We recognise that management, as majority shareholders, could benefit from higher dividends declared. However, we are mindful of the volatile macroeconomic environment, coupled with ongoing challenges presented by higher labour and material costs. To uphold our commitment in delivering sustainable returns to our stakeholders, we prioritise prudent cost management and discipline in our finances and cashflow management for sustainable growth.

Dear Eng Koon Hock, you wrote:

Will there be further revenue/profit contribution from the development projects Phoenix Residences and The Essence?

Revenue from The Essence has been fully recognised, while approximately 58% of the revenue from Phoenix Residences has been recognised. Phoenix Residences is expected to obtain its TOP in July 2024.

What proportion of the current order book of S$656.50m are secured from the pre-covid period?

Approximately 8% of the current order book of $656.5 million comprises contracts secured from the pre-COVID period.

2nd half margins for construction segment are relatively higher than 1st half. Is this trend sustainable going forward?

The improvement in construction segment margins for 2H 2023 as compared to 1H 2023 was attributable to the Group's on-going initiatives to improve cost management and focus on operational efficiencies to better manage margins.

Whether the above trend is sustainable going forward depends on site conditions, types of work performed at the construction sites and professional technical work required at the various stages of work for the projects.

The profit margin on any particular construction project depends on the type of work which is being carried out during any time period. Different work activities and work scope would have differing profit margins.

Rental income from the Singapore investment properties seems low relative to the current interest rate environment. Any plans to monetise these assets?

In accordance with our strategy to diversify earnings and drive recurring income streams, we will retain our property investment in Singapore to ensure long-term stability and growth. We will also continue to pursue strategic partnerships to strengthen our foothold in property development and investment ventures to deliver long term value to our stakeholders.

While I understand the company's desire to diversify, I hope that the company will consider a higher dividend payout ratio in future as a substantial portion of total assets are already committed on the investment properties.

Dividend was paid for FY2022 notwithstanding that the Company had incurred a loss per share (basic) of 0.33 Singapore cent in FY2022.

Nevertheless, the Company will consider a higher dividend payout ratio in the future.

Dear Investors,

Thank you for all your questions and the interest in OKP Holdings Ltd. We have come to the end of this Q&A session.

We have enjoyed and learnt much from your questions and we hope that you have a better insight of our Company and know more about our operations.

Rgds,
The Management Team
OKP Holdings Ltd.