Dear Investors,
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 Arnold, you wrote:
Interested in buying your Perth apartment property. pls email me if interested.
Thank you for your interest.
The Group's investment property situated at 6-8 Bennett Street in Perth, Australia, is a freehold office complex.
Dear Sam, you wrote:
What is the expected gross margin for the construction and maintenance business? 30%?
The gross margin for the construction and maintenance business varies depending on a multitude of factors. This includes project complexity, market conditions and competition within the market.
To protect margins, the Group will continue to ensure effective cashflow management and remain prudent with its capital structure and finances. Additionally, the Group is committed to raising our productivity by integrating technology into our business processes to reduce reliance on manpower and upgrading our workforce.
Strong execution remains critical in ensuring that projects are completed on time and within budget and unnecessary additional costs are not incurred.
Is there a minimum and maximum cap to the contract value which the company are comfortable tendering in?
Generally, we do not place a cap on the contract value of a project that we tender for. The Group assesses each contract based on several factors, including risk exposure and operational capacity. While we do not have a strict cap, we prioritise projects that align with our strategic objectives.
With our strong track record in public sector works and civil engineering projects, OKP will stay focused on securing the upcoming public infrastructure projects to deliver value to our shareholders.
Any concrete/ preliminary regional expansion or overseas JV in sight for the coming 2-3 years ahead?
The Group continuously explores strategic partnerships to strengthen our foothold in property development and investment ventures, both locally and overseas, with the objective of diversifying earnings and strengthening recurring income streams. We will make the necessary announcements whenever there are any material developments.
Dear Loh Kah Kheong, you wrote:
Congratulations on a stellar set of results.
I was tracking the order book history of your company
1. 30th June 2024 (Order book $706M ) as reported in the 8th August 2024 press release of 1H2024 results
2. 15th Nov 2024 (Order book $572M) as reported in Straits Times with a $188.M contract from LTA
Can you explain how did Order book drop from $706M to $572M, a drop of $134M, when after winning a $188M contract. Moreover, OKP annual revenue for 2024 is only $181M.
We would like to highlight that the article in the Straits Times which you have quoted was first published on 28 August 2023.
The Group secured a S$188.3 million contract from LTA in August 2023, bringing our order book to S$572.0 million then. From December 2023 to 30 June 2024, we further strengthened our order book with six additional contract wins totalling approximately S$271.2 million, resulting in an order book of S$762.0 million as at 30 June 2024, after taking into account revenue recognition.
Dear Huang Zhixiong, you wrote:
Congratulations for the company's wonderful results Y2024. The following are my concerns.
1. Y24, REV181.8m, GP58.2m, NP32.8m, GM32%, NM18%, ROE16% even with large sum of net cash. Such good set of results normally can only be produced by unique business model with strong talent from management. Can management explain to us what the unique business model the company owns and how the company is going to protect its uniqueness so as to continue grow its earning potential.
The Group is a well-acknowledged contractor in the transport infrastructure and civil engineering industry in Singapore and the region, differentiating itself in both public and private sector tenders through our decades-long track record, wide expertise, and a proven ability to navigate industry cycles.
OKP's strong reputation as a preferred civil engineering contractor gives the Group a competitive edge in securing contracts across various industries. We have a robust order book of S$600.7 million as at 31 December 2024, with projects extending till 2027, primarily driven by public sector projects.
To maintain our competitive edge and drive long-term growth, the Group is committed to investing in and adopting cutting-edge technologies and innovating work processes to enhance productivity, improve operational efficiency, and drive innovation across its operations. We believe that the higher productivity will lead to increased profits and competitiveness.
Furthermore, we explore strategic partnerships to strengthen our foothold in property development and investment, with a strong focus on diversifying earnings and strengthening recurring income streams.
2. Company holds lots of net cash, can management explain to shareholders the future plans for reinvesting such precious asset with high returns in ROI as high as 16% as our ROE, with minimum risk. Of course, buying back its own shares is the most obvious way to do so.
Share buybacks remain a consideration, but we will continue to assess capital deployment opportunities to maximise shareholder value while maintaining financial prudence.
Dear Sam Lim, you wrote:
As OKP is majority family owned, can the management share what's the constitution which is set in place for a long term succession planning, in particular that Mr Or is already 90 years old. What measures are in place so that there's lesser risk of board in-fighting like we just witnessed with CDL?
At OKP, we are committed to ensuring high standards of corporate governance. To mitigate the risk of board conflicts, we uphold a strong governance framework with a clear division of responsibilities between the leadership of the Board and Management, ensuring that no one individual has unfettered powers of decision-making.
Our formal and transparent process for the appointment and re-appointment of directors promote board independence, taking into account the need for progressive renewal of the Board. Additionally, the Board prioritises effective succession planning for all key positions and maintains effective communication with shareholders through timely disclosures via SGXNET. These measures collectively strengthen corporate integrity and minimise governance risks.
Dear HS Tan, you wrote:
Hi Management,
The rental income contribution to the group's earnings is poor relative to the rest of the business.
What is your plan for 2025 to bring up the numbers for rental?
The Group's rental income remains resilient, recording S$6.1 million for FY2024. We are focused on driving rental growth by filling vacant units to increase occupancy levels, thereby increasing rental income.
Also can you list out the projects for 2025?
For 2025, our ongoing projects are primarily driven by the public sector. Key projects include the Construction of Cycling Path Network in seven towns, the Maintenance of roads, road-related and commuter-related facilities along South East sector and Commuter infrastructure enhancement works along TEL, CCL6, NEL and DTL, which are valued at approximately S$188.3 million, S$95.9 million and S$100.3 million respectively.
Do you booked the revenue for projects only upon completion or in stages throughout the life cycle of the project on your financial statements?
Revenue is recognised progressively over the project lifecycle based on percentage of work completion method.
Dear Jay, you wrote:
Your GPM has expanded massively, to 10 year historical high. What are the factors contributing to that, and which of the factors are cyclical and which are sustainable? Overall, is it realistic to assume that GPM has further room to expand in the next 12-24 months?
The Group recorded a higher gross profit margin of 32.0% in FY2024, up 16.6 percentage points from FY2023, mainly attributed to the Group's ongoing initiatives to enhance efficiencies, productivity and cost management, despite the higher overhead costs and rising manpower costs.
While cyclical factors such as labour market dynamics and material costs pose challenges, strong execution remains a priority, ensuring projects are completed on time and within budget. The Group remains committed to a high level of operational efficiency and will continue to improve project management, while embracing technology for greater efficiency.
What is the GPM for construction revenue and maintenance revenue respectively in 1H24/2H24/FY24? Can you also provide the comparable for 1H23/2H23/FY23?
The GPM for both construction and maintenance revenue are set out in the below tables for the respective periods.
| 1H2024 | 2H2024 | FY2024 | |
|---|---|---|---|
| Construction | 24.5% | 35.4% | 31.0% |
| Maintenance | 30.8% | 30.6% | 30.7% |
| 1H2023 | 2H2023 | FY2023 | |
|---|---|---|---|
| Construction | nm | 27.2% | 13.9% |
| Maintenance | 10.2% | 15.0% | 12.5% |
Why is minority interest negative in 2024?
Non-controlling interests of $0.9 million was due to the share of losses of our subsidiary corporation, Raffles Prestige Capital Pte Ltd, in FY2024.
You have controlled administrative expenses very well, and in fact it decreased y/y, helped in part by reduction in directors' remuneration. How should we think about the trajectory in 2025? Would it go up and would it be in the ballpark of single or double-digit increase?
Based on projections from Building and Construction Authority ("BCA") released on 23 January 2025, Singapore's construction demand is expected to increase this year, with the value of construction contracts to be awarded ranging between $47 billion and $53 billion. Normalised to real values, 2025's demand is projected to range between $35 billion and $39 billion, which is between 0.3% and 11.7% higher than pre-COVID levels in 2019.
The Group is committed to investing in and adopting cutting-edge technologies and innovating work processes to enhance productivity, improve operational efficiency, and drive innovation across its operations.
The Group remains cautiously optimistic in view of challenges, including the higher-for-longer interest rate environment and geopolitical risks. Nevertheless, the Group remains focused in building a sustainable and resilient business to navigate challenges effectively.
We see that order book growth has been very healthy but the growth seems to have slowed. Given BCA estimates, is it realistic to assume an acceleration in orderbook growth? Is there capacity to take on more orders?
We remain selective in tendering for projects that align with our strategic objectives. With our strong track record in public sector works and civil engineering projects, OKP will stay focused on securing the upcoming public infrastructure projects to deliver value to our shareholders.
Given your backlog and the mix of orders, would maintenance revenue growth outpaced construction revenue growth in 2025? Would the growth profile be better or worse or similar to 2024's experience?
The Group expects both maintenance and construction revenue to contribute positively in 2025.
To sustain the growth trajectory, the Group is leveraging on our decades-long track record and core expertise to capitalise on growth opportunities by tendering for both public and private projects.
Dear Lau Swang Meang, you wrote:
I have bought the company shares in my margin account recently
I am a bit worry about the future of OKP in term of the order book. In the past, we have news of winning contracts. As for year 2025, there is no new of winning contracts. Can update us the possible tender contracts results by at least fall within which quarter? Like Q1, Q2, Q3 or Q4 2025, so that we can monitor.
We have a robust order book of S$600.7 million as at 31 December 2024, with projects extending till 2027, primarily driven by public sector projects. To keep our shareholders informed, we will continue to announce the tenders secured in an accurate and timely manner through SGXNET. All disclosures as announced through SGXNET will also be made available on the Company's website.
Dear Sun, you wrote:
(1) 2024 gross margin is 32%, double from last year! And both construction and maintenance segments show higher gross margin. Is that due to any one-off factor? Can we expect 2025 gross margin will be at similar level?
The Group recorded a higher gross profit margin of 32.0% in FY2024, up 16.6 percentage points from FY2023, mainly attributed to the Group's ongoing initiatives to enhance efficiencies, productivity and cost management, despite the higher overhead costs and rising manpower costs.
We strive to maintain healthy margins through a disciplined approach to cost management and operational prudence without comprising on quality. Strong execution remains a priority, ensuring projects are completed on time and within budget. The Group remains committed to a high level of operational efficiency and will continue to improve project management, while embracing technology for greater efficiency.
(2) Is the company still tendering any project related to Changi T5?
The Group continues to assess opportunities related to Changi T5 and will participate in tenders that align with our strategic objectives.
With our strong track record in public sector works and civil engineering projects, OKP will stay focused on securing the upcoming public infrastructure projects to deliver value to our shareholders.
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.