Pros
- Acceptable moat – only listed road specialist, many years of experience and track record
- Strong financials, FCF, ROE, margins
- Good dividend yield
- Even though undertaking mostly government projects, margins are high – shows management competence
- China Sonangol catalyst (construction of condos, overseas opportunities, can be acquisition target)
- Oil and gas industry catalyst
- Property development catalyst
- Overseas JV opportunities -$6.75 mil set aside for overseas business expansion
- Won huge project for CTE widening from LTA – shows competency and trustworthiness of the company
- Can acquire other smaller companies with cash hoard
- MRT contract catalyst
- Lots of awards won and in August 2010, OKP made it to the Forbes Asia’s ‘Best Under A Billion’ List
- Highest order book in company history till 2014 and winning lots of contracts of late
- Construction expenditure by government usually increases during downturn
- Or Kim Peow, 76 years old and owns 55% of company. Potential general offer by China Sonangol which owns 14%?
- High success rate in tendering – 94% success rate in 2010
- PUB said it will commit $750m over the next five years to fight flooding. OKP won a Zion Rd canal contract in Aug 2011 so it has experience in this and can win more contracts.
- Opportunities like N-S expressway ($6-7 bil – starting 2013), Bukit Brown 4-lane dual carriageway (~$50 mil each package – 2013-2016), road around sports hub (<$1.3 bil – by 2014), widening/improvement of existing expressway.
Cons
- Competition from Singapore and overseas companies but with respect to road works and construction – however, even though there’s keen competition, each company will get a slice of the billion dollar pie
- Relying too much on government (especially LTA) for projects can be a double-edged sword
- Road development cannot go on increasing as stated in LTA masterplan – however, can be mitigated by property development, overseas joint venture and expansion that the management is currently looking into
- Exposure to labour shortage and foreign worker levy increase – OKP said it’s managing well and can pass on increase to customer
- Price fluctuations and availability of construction materials – for LTA projects, there’s a clause to claim the rise in material costs
SudhanP.com 