OKP released their half-year results on Friday, 20th July 2012. I will not be analysing the numbers from the results in this post. Their results can be viewed from the SGX annoucement here. Rather, this post will be about my views of their results.
When comparing the yearly results (1HFY2012 vs 1HFY2011), their net profits dipped close to 50% and their cash flow from operations went into negative territory. This is a slight concern for me. However, OKP is a contract-based business and their profits dipped due to lower revenue recognition from their ongoing projects. It is better to look at full year numbers for such companies. A major $119 million CTE project they undertook is already completed and they need another such huge contract win to prop up their order book again. Having said that, their order book is actually healthy at $340 million with projects lasting till FY2014 but I’m still hoping for a major contract win.
In their press release statement, OKP has stated there are three projects likely to be awarded by LTA this year and they are for the expansion of Kallang Paya Lebar Expressway/Tampines Expressway Interchange, extension and reconstruction of Newton Flyover and construction of New Lornie Road. I believe OKP is bidding for this project since they mentioned the projects in their press release. If they are not bidding or had not bid for the projects, I don’t think they would cite the projects in their press release. PUB’s canal projects worth $750 million in total are also up for grabs and OKP will be looking to tender for those as they have expertise in canals construction and widening. I’ll be monitoring their order book closely. It will be extremely surprising if they do not win any of the contracts stated above, even though competition is getting keener. OKP has a solid track record and is a reputable local construction company.
Looking at a longer term, the construction of the North-South Expressway will be called for tender around 2015 and the total cost is around $7 to $8 billion (according to SIAS Initiation Report in May 2010). I believe OKP will be tendering for this project as OKP has expertise in building viaducts and around 8km out of the 14 km expressway will be viaducts (as mentioned in my post on OKP AGM). The Outer Ring Road System is also expected to start construction in 1st Quarter of 2013 (according to LTA site) but the tender results are not out yet. I’m not sure if OKP bid for this project as nothing about this project was stated in their press release. They have also recently ventured into the property development business but that will take a longer term to bear fruition though. I will not be expecting anything huge from there in the next one to two years.
On a side note, OKP won the Best Chief Financial Officer Award, Best Managed Board Award (Bronze) and Best Investor Relations Award (Bronze) under the ‘Companies with less than S$300 million in market capitalisation’ category at the recently concluded Singapore Corporate Awards (SCA).