DBS Vickers has maintained its buy call for OKP Holdings and its target price of $0.80 as orders continue to flow.
Last week, OKP announced its 7th contract win this year -- a $46.8m contract from PUB to improve the Alexandra Canal between Zion Road and Kim Seng Road.
With this order win, OKP has won about $152 million worth of contracts YTD in 2011, and has almost met DBS Vickers’ FY11 new order win assumption of $170 million within the first 8 months of the year.
“We estimate current net outstanding orderbook of over $250 million, which underpins our FY11F earnings while securing more than 60% of our FY12F revenue. Net book-to-bill ratio stands at ~1.8x,” says the brokerage house.
Other business opportunities are also emerging for OKP. Major shareholder China Sonangol has recently agreed to buy another 15 million vendor shares of OKP Holdings at a premium to the market ($0.66 per share), bringing its stake up to 14% and further strengthening its commitment to OKP as a partner.
China Sonangol has shown serious intent in the Singapore property market through its ongoing Angullia Park project and the Amber Towers en bloc acquisition in April 2011, creating more business opportunities for OKP in building construction contracts as well as potential investment avenues.
To date, OKP has outperformed the STI to date. OKP has around $97 million net cash on its books ($0.32 per share or 56% of its current market cap). The surplus cash hoard allows the company a buffer against any adverse market conditions, return part of it to shareholders as dividends, potentially acquire complementary businesses and/ or invest in related fields like property development.
“We estimate 5 cents total DPS in FY11/12F (including special dividends). Even if OKP were to pay out only 3 cents, that still translates to a decent 5.3% yield at current price,” says DBS Vickers.
OKP at 57 cents today tells me that construction stocks are going to be the resilient sector in this downturn. Lian Beng has shown that it can even move up ! And why not, when these companies have big order books that will stretch for the next 2 or 3 years
OKP is increasingly getting analyst coverage. Only a matter of time when the stock gets re-rated.
55.5 cents, OKP is trading at a trailing PE of 7.0x, above peers’ average of 5.5x. However, excluding net cash of S$95m, PE would be 3.0x.
I have been looking at OKP on & off for some months. The volume of trading is low, which means that the shareholders are long term, and there is little BB pushing up & down of this stock. The fundamentals are pretty good so it is a stock for value investors. The half-yr dividend was 1 cent. Final dividend may be 2+2 cents, as was the case last year. OKP should not disappoint or it will lose ground, especially when the order book is so big and the future is secure. The cash is strong too. So assuming it's 4 cents + 1 cent = 9% dividend yield for the longterm holders. Better than buying REITs, since OKP is potentially a growth stock.
Q&A asked by a forumer at valuebuddies.com & answered by the company. It looks like a good safe stock with its balance sheet able to easily ride thru the current storm in the equity markets.
Q3. Also, OKP seemed to be holding onto a significant amount of cash (S$95.8 million in 9M FY11). Are these cash idle? Or does OKP normally need to pay a tendering deposit for your contract work? If the cash are idle, what's OKP's plan for its utilisation? Will it mainly be allocated for the property venture with China Sonangol?
A3. OKP has always been prudent in its approach to business operations. With regard to tenders, OKP does incur some associated costs but these are dependent on the nature of the tenders, and so far, the amounts incurred have been minimal.
OKP has a clean and strong balance sheet, with no debt and strong cash position. We have already signalled the intention to start a property development unit, and we can tap on the cash in the event that a significant opportunity presents itself.
Q4. What is the progress with regard to the property venture with China Sonangol? Also, what is the prospect regarding it given the bearishness over Singapore property market?
A4. As China Sonangol is one of our larger shareholders, we continue to engage them on an on-going basis in the normal course of business for any business opportunity and/or collaboration that could arise.
As for the Singapore property market sentiment, we continue to be vigilant, monitoring market developments closely. We believe that there are still business opportunities, and we shall be extremely cautious in taking our initial steps in this area. We take a long-term approach, and we believe that in the long term, this is still a viable business for OKP.
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