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.
The Management Team
OKP Holdings Ltd
Dear Wenqi Zeng, you wrote:
I noticed OKP's cost of sales and admin expenses have increased significantly as a proportion of sales, affecting the profits. I would like to know the measures that OKP is taking to manage costs and to improve profit margin of the projects on hand.
While the Group continues to review the required workforce size to take on projects in order to manage costs, there is an optimal workforce size given the Group's current operational level. Any reduction in the workforce size could compromise our service standards. In addition, the ongoing COVID-19 outbreak could potentially result in reduced access to manpower, which may affect the margins of our projects. Nonetheless, we remain focused on raising productivity and relying on technology to reduce costs.
Dear KC Ong, you wrote:
Are you currently seeing any impact from Covid-19 on operations? Will that impact your construction billing?
As a construction firm, OKP is affected by a shortage of skilled and experienced manpower in the industry. We remain concerned over the outbreak of COVID-19, which could affect the supply of manpower from China should the situation worsen. As a forward looking company, we will continue to conduct training to raise the technical expertise of our existing pool of talent. At the same time, we are exploring the implementation of new construction technology, tapping on government grants and collaborating with partners, where feasible, to mitigate issues.
Do you expect the tightening of worker quota in 2021 to impact your operations?
The availability of manpower has always been an issue in labour intensive industries. Furthermore, we have already seen the impact from the outbreak of COVID-19, with the Ministry of Manpower announcing that it will reject all new work pass applications for foreign workers from the Chinese province of Hubei until further notice. While we do not source for manpower solely from Hubei/China, we remain concerned and will continue to monitor the situation while managing our manpower needs accordingly.
Looking into 2020, are you more optimistic on the outlook of the sector? What's your view on tender pricing trend for 2020?
The construction sector is expected to remain stable, supported by public sector construction demand. According to the Building and Construction Authority, construction demand for 2020 is expected to remain strong with sustained public sector construction demand. The total construction demand for the year is expected to range between $28.0 billion and $33.0 billion, with public sector demand expected to reach $17.5 billion to $20.5 billion, making up about 60% of the projected demand. We will continue to leverage on our core strength and track record in the construction sector, as we continue to tender for new projects.
As for the property sector, the COVID-19 outbreak has resulted in travel restrictions on Chinese passport holders, many of whom could be potential buyers of luxury homes in Singapore. The travel restrictions are expected to affect the sales of new launches during the year. We are keeping a close watch on the tender pricing trend for 2020. Most recently, three URA residential site tenders closed with lukewarm response from developers, reflecting a cautious market outlook. Looking ahead, we will remain focused on delivering well-designed properties at attractive and fair price points. Meanwhile, we are taking a selective approach in our land acquisition.
Dear Ryan Sim, you wrote:
What are your plans for 32 Tagore Lane? Are you going to merge it with 30 Tagore Lane or redevelop it separately?
As announced, the acquisition of 32 Tagore Lane is for investment purposes, including for rental income. This is part of the Group's strategy to diversify earnings and broaden our recurring income revenue base.
Dear May Ng, you wrote:
OKP seems to be increasing its exposure to property development and investment. Will OKP eventually stop tendering for public construction projects given the high risk involved?
The Group's core strength and track record is in construction and we will most certainly continue to tender for public construction projects. The sector outlook continues to remain strong and the prospects will eventually be translated into contracts and awards. As at 31 December 2019, we are still backed by a strong order book of S$283.1 million, with projects extending till 2023. The Group will continue to remain focused on its core business and leverage on its solid track record by strengthening its civil engineering expertise.
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.
The Management Team
OKP Holdings Ltd.