OKP’s Annual General Meeting FY2011

OKP’s Annual General Meeting (AGM) for FY2011 was conducted on 25th April 2012 at their Headquarters at Tagore Building and I was there for it. This post will indulge in some of the more important points that were discussed in the AGM.

The AGM was held at the conference room and luckily, I arrived early to grab my seat in front of the Management. The AGM was slated to start at 11am and more people streamed in at that time. The room was not that huge and it was filled to the brim. Extra chairs had to be brought in and even then, a few people did not have seats and had to stand around. Mr Or Toh Wat, Group MD of OKP (“Management”, hereafter) said the turnout was bigger than previous year’s. This shows positively that more people are getting interested in OKP and the business prospects. Management said that next year, they will shift to another building where the conference room is much bigger. Next year’s AGM will be held in there.

Some of the more important points that were covered in the AGM:

• Property business – Won’t be going in a big wave and are currently looking for a partner to tie up with
• Competitive advantage of OKP – vast experience of over 100 years, solid track record with government bodies and  have been award contracts even if their bid wasn’t the lowest one
• A shareholder asked what allowed OKP to have 94% tender success in 2010. Management replied that LTA uses the price-quality method for tender evaluation to decide which company to award a contract to. (Under this method, “both price and quality criteria are assigned weightings which are then translated into quantitative scores. The tenderer with the best combined price-quality scores will be recommended for award of the contract. PQM also serves to assure the public that the procurement and tender evaluation processes take into account the non-price attributes and is not merely decided by the lowest compliant offer” (extract from LTA site). Also, “performance in past or ongoing projects in areas such as timeliness, safety and quality, relevant track records or specific competencies that enhances the tenderer’s suitability for the job” are also considered (extract from BCA site)).
• Material costs takes up around 80% of total costs and labour the other 20%.
• Some of the material costs are pegged with supplier to prevent fluctuations.
• The foreign worker levy increase’s full impact will be in 2015. However, the total increase in costs for OKP will be less than 1%.
• Now, 30-35% of the OKP’s foreign construction workers are under the core-trade, allowing OKP to enjoy a lower levy for them. OKP has plans to get 100% of the workers to be core-trade trained. Training the workers is essential to OKP.
• One shareholder asked in the long-term, what are the difficulties OKP will face. Management said OKP is dependent mostly on government projects (it bodes well for OKP if government is rolling out more public jobs in the future). Next, Management also said rising raw material cost can impact OKP. However, these factors are external in nature and cannot be controlled by OKP. What OKP can control is the training of the staff and as said earlier, OKP focuses a lot on training.
• Another shareholder asked between going into property development business  and overseas expansion, which is better. Management said for overseas expansion, need to choose  a good partner and have been exploring for many years for overseas expansion opportunities. Going into property development is a safer bet as it involves Singapore which the Management is more familiar with. Also, Management agreed that the local property market might be at the peak now. Thus, OKP is prudent on when to enter into the fray. If OKP wasn’t prudent, it would have entered into the property development business already. Lastly, Management said t’s their duty to enhance shareholder value and therefore, if doing business in Singapore is no longer viable, it will look for greener pastures overseas.
• For the North-South highway project, the whole highway is a total of 14km. 8km of it will be viaduct, 5km will be tunnel and around 1km of semi-tunnel. Building viaduct is OKP’s expertise but not the tunnels. LTA will probably open the project for tender in 2015 and project will commence in 2016. OKP might face stiffer competition from foreign companies if back in their home country, the economy slows down.
• Site managers and supervisors in-charge ensure that the workers are not talking on the phone and being unproductive during working hours. There’s a reporting system and work is monitored and measured. There are heads (something like foreman) put in place to look after each small group of workers. The heads are still foreign workers but with more years of experience.
• OKP assured the shareholders that it is all the while looking into increasing productivity of the workers.

After the meeting, I managed to ask Mr Or if the high margins seen in FY2011 is sustainable going forward. He said the high margins is one-off. The high margins seen were due to savings in some design-and-build construction projects. Overall, I got the feeling that Management is very prudent and knows what it is doing. I have more confidence in this Management after attending the AGM.