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Management Q & A

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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.

The Management Team
OKP Holdings Ltd

Dear Jayster, you wrote:

The government increased foreign labour levy substantially for the construction sector. What impact will it have on the company? How is the company going to improve productivity with increasing labour cost?

As a construction company, OKP is highly labour-intensive and reliant on skilled foreign workers for our projects. Thus any increase in foreign workers' levies would affect us.

Based on the Government's latest announcement, we anticipate that our labour cost will not increase significantly. With regard to new and upcoming tenders that we will participate in, we may have to consider passing some of these costs to our customer, bearing in mind the need to balance this in such a way that our pricing would still remain competitive.

Internally, OKP will continue to invest in those currently in our employ, so that we are able to derive optimum benefit. For example, we can enhance their quality through training as well as skill upgrading to improve their productivity.

Dear Ah Huat, you wrote:

Can share how the company control construction cost even as 4Q10 revenue declined 11.3%, costs of works declined even more at 23.9%, yet gross profit shot up 31.5% to $10M. How do you do it?

The improvements in gross profit were mainly due to:

  1. Better project management eg. proper site planning, detailed planning in the construction processes, effective site management
  2. Tighter cost controls eg minimise construction material wastage at site, employ effective methodologies in every stage of construction.

Other reasons include variation orders and changes in design which we have been able to undertake and execute efficiently, thus enhancing our profit margins.

Dear Gerald Toh, you wrote:

Do you have plans for secondary listing in a foreign bourse? Any expansion plans beyond Singapore?

We have said that we would be keen to move outside Singapore provided the right opportunities present themselves. Indeed, our strong balance sheet and cash flow position enable us to explore larger projects and investments, either here or overseas.

Our teaming with China Sonangol International (S) Pte. Ltd. in 2009 as a strategic partner was to help us to extend our reach further afield. China Sonangol International (S) Pte Ltd is a subsidiary of China Sonangol International Limited ("China Sonangol"), an overseas conglomerate that specialises in oil, gas, and minerals investment and explorations, crude oil supply and national infrastructure construction projects with headquarters in Hong Kong. Our ultimate goal is to grow our future through each of these moves, ultimately creating an organisation that is vibrant and attractive -- to our customers, our staff and our investors.

With regard to a secondary listing, there are no plans to do so at this juncture.

Dear Shirley Wee, you wrote:

I noticed the bulk of the company's order book comes from the Singapore government. I thought public projects have very low margins as it is awarded to the lowest bidder. How do you make money from such low margin business?

OKP has been in business since 1966 and we have been executing projects in the public sector since then. Our tender prices are competitive, and as a business strategy, we would only participate in projects where we are able to enjoy a reasonable profit margin. Our ability to secure public sector projects and turn in decent margins is reflective of our highly-experienced management team who is able to price a project at a suitable level and manage costs efficiently, as well as a competent project management team.

Dear Ong Hwee Hwee, you wrote:

You bought a new property recently at Sungei Kadut Drive, are you going to sell your current headquarters at Tagore Drive?

At present, we have no intention of selling our current headquarters at Tagore Drive. The acquisition of the property at Sungei Kadut Drive is used for fabrication yard, workshop, storage of construction materials and office.

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.

The Management Team
OKP Holdings Ltd.