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Challenging Market Conditions Cause Quarterly Profits at OKP Holdings Limited to Slide 55%

okp logoOKP Holdings Limited (SGX: 5CF), a home-grown infrastructure and civil engineering company that specialises in the construction of airport runways and taxiways, expressways, flyovers and roads, among others, released its first quarter results on Monday.

OKP derives revenue from two business segments – Construction and Maintenance.

For the latest quarter, the firm announced that revenue rose 13.7% year-on-year to S$30.2 million. The rise in revenue was mainly due to a 103% surge in revenue from the maintenance business segment, on the back of a higher percentage of revenue being recognised from existing and newly awarded maintenance projects. On the other hand, the construction business saw an 8.2% year-on-year decline in revenue to S$19.6 million, due to lower percentage of revenue being recognised from several construction projects nearing completion and the absence of new contracts secured during the period.

Despite the increase in revenue, competitive pricing within the industry and rising variable costs such as manpower cost and costs of construction materials resulted in a net profit plunge of 55% to S$1.1 million for the quarter.

Turning our attention to the balance sheet, the firm’s cash position improved from S$37.6 million, as at the end of last year, to S$45 million, as at 31st March 2014. It has a total borrowing of S$2.6 million.

Net cash flow generated from operations surged from a mere S$56,000 in the previous year to S$7.7 million in the latest quarter, mainly due to changes in working capital. The positive showing translated to the improved cash balance as seen earlier.

Managing Director of OKP, Mr Or Toh Wat, said, “As we remain challenged by rising business operating costs, we will exercise prudence in our operations while continuing to prospect actively and selectively for new projects to grow our business. We continue to be supported by a pipeline of projects and have secured two new contracts from Land Transport Authority and Public Utilities Board totaling approximately S$56.6 million since the start of 2014. As at today, the Group’s net order book based on secured contracts stands at S$189.6 million, lasting till 2017.”

The firm’s shares last changed hands at S$0.315 on Monday, valuing it at 20 times its historical earnings.