OKP Piling Ahead Rather Slowly

okp logo Home-grown infrastructure and civil engineering company, OKP Holdings Limited (SGX: 5CF), seems to be slowing down in its growth as seen from its latest quarter results.

OKP reported a third quarter of 2013 (3Q 2013) revenue of S$30.7 million, a growth of 7.8% over the previous year. However, the bottom line saw a plunge of 88.2% to just S$287,000. This translates to a net margin of 0.9%.

The company said that the revenue rise was due to “higher revenue recognition from its key construction projects as well as existing and newly-awarded maintenance contracts”. The drop in net profit has been attributed mainly to three reasons. They are:

1)      Higher costs of works due to increases in sub-contracting;

2)      Higher costs of works due to increases labour; and

3)      Additional costs involved for certain sewer-related projects which had unfavourable site conditions that were unforeseen

As of 30th September 2013, the company is in a net cash position of S$34.8 million, after deducting the total debt of S$2.4 million.

A net cash of S$3.2 million was used in operating activities for 3Q 2013 versus S$936,000 generated in the previous year.

The gross order book stands at S$447.0 million, projects lasting till 2015. Some of the projects OKP is currently undertaking are:

1)      Extension of the Central Expressway/Tampines Expressway/Seletar Expressway Interchange worth S$75.3 million;

2)      Design-and-build project involving the interchange at Tampines Expressway/Sengkang West Road/Seletar Aerospace Way worth S$61.7 million; and

3)      Improvement to roadside drains at Lucky Heights Estate (Eastern) worth S$15.0 million

Group Managing Director, Mr Or Toh Wat, commented on the future trajectory of the company. He said, “To augment the pipeline of transport infrastructure projects, we will tender actively and build on our civil engineering core competencies while improving our value proposition… As we explore potential growth opportunities, both locally and overseas, we aim to increase shareholder value through adopting stringent cost control measures and improving productivity and efficiency to remain competitive”.

OKP has been lagging the Straits Times Index (SGX: ^STI) by 27.5% so far for the past one year and 35.1% for the past two years. The shares are currently just shy of 8.8% from the 52-week low of $0.34.

OKP last traded at $0.37 on Monday. The historical PE ratio is at 9.2 and the dividend yield is 4%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.  Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.