OKP Holdings Limited (5CF) Earnings Call Transcript & Summary

Good afternoon, everyone. We are pleased to take you on to key highlights of our F1 2021 results and corporate developments. As a quick background, we are a leading home-grown infrastructure and civil engineering group with a steady track record and strong expertise in the construction and maintenance business since 1966. We have, since 2012, expanded into property development and investment as a means of diversifying income and have seen positive returns. In FY 2021, we continue with our strategy of diversifying our earnings base and building on recurring income stream. Our efforts have paid off, and we have made good progress in our property business and investment property. Firstly, our 84-unit condominium at Chong Kuo Road, The Essence, which was launched in March 2019, has been fully sold through our active marketing efforts. Secondly, Phoenix residences, which received approval for fresh 99-year lease extension, to be developed into a 74-unit residential property and launched in December 2020. We stepped up our marketing efforts to engage home buyer through physical and virtual channels and have sold approximately 38% of the units to date. In FY 2021, we also completed the acquisition of a few freehold property in Singapore for investment purposes. They are a three-storey attic shophouse at 35 Kreta Ayer Road, which was acquired for $11.3 million, as well as an adjoining 2-storey conservation shophouses located at 69 and 71 Kampong Bahru Road, which was acquired at $12.4 million. Our investment property in Australia has also contributed significant rental income in FY 2021 and continues to achieve full occupancy as at 31st December 2021. Meanwhile, for construction, the group remains supported by a healthy pipeline of projects. We will continue to leverage on our strong track record and civil engineering expertise to tap on the strong construction demand. Financial review. In FY 2021, the group recorded a revenue of $90 million. The increase in group revenue is largely due to the increases of 22.8% and 53.1% in revenue from the construction segment and maintenance segment, respectively, as well as a 11.9% increase in rental income. Net profit attributable to equity holders was $1.5 million in FY 2021. Balance sheet remained strong with free and free cash equivalents of $45.8 million and our healthy construction order book of $329.2 million provides clear revenue visibility till 2025. The construction segment represent 62.8% and is a major contributor of the group's FY 2021 revenue. Maintenance segment represents 29.3% while rental income contributed 7.9% to the group's total revenue in FY 2021. Revenue from the construction and maintenance segments increased to $56.5 million and $26.4 million, respectively in FY 2021, mainly due to the higher percentage of revenue recognized from a number of existing and newly awarded construction and maintenance projects during FY 2021, coupled with the temporary cessation of construction activities in compliance with the government COVID-19 measures in FY 2020. Rental income generated from investment properties saw an increase to $7.1 million due to rental income generated from the property at 6-8 Bennett Street, East Perth, Western Australia. And the newly acquired investment property at 35 Kreta Ayer Road and 69 and 71 Kampong Bahru. The group gross profit dipped by 7.9% to $6.8 million in FY 2021 from $7.4 million in FY 2020, and gross profit margin decreased by 3.1 percentage points to 7.5%. The lower gross profit margin for FY 2021 was largely due to the lower profit margins for new and current construction and maintenance projects as a result of the increase in overheads, prices of materials and rising manpower cost. Dividend. Our Board of Directors is pleased to recommend a final one-tier tax-exempt dividend of $0.7 per ordinary share payable on 17 May 2022 to shareholders. The proposed dividend is subject to the approval of the shareholders at the forthcoming Annual General Meeting of the company. This proposed dividend represents a dividend yield of 3.7% based on the current share price of $0.19 and a dividend payout ratio of 142.9%. Business review. The Construction & Maintenance segment continue to be a strong revenue pillar and core business, consistently accounting for 92.1% of the group's total revenue. Public sector projects remain as OKP key contributor. We are supported by a net order book of $329.2 million with projects extending till 2025. The next 3 slides provide a quick snapshot of our 17 ongoing public sector projects. In terms of the property development, the 84-unit development at Chong Kuo Road, The Essence, which launched in March 2019 is expected to TOP in 2023. It has achieved good response and has been fully sold. Meanwhile, Phoenix Residences has been approved for redevelopment into a 74-unit condominium and received grant of a fresh 99-year lease extension was launched in December 2020. Having stepped up our marketing effort to engage homebuyer through both physical and virtual channels, we have sold approximately 38% of the units to date. To expand its portfolio of investment properties, in FY 2021, the group completed the acquisition of 35 Kreta Ayer Road for $11.3 million. This is a freehold property with a 3-storey attic shophouse and has a lot area of approximately 1,568 square feet and the total floor area of approximately 4,240 square feet. The group also completed the acquisition of 69 and 71 Kampong Bahru Road in August 2021 for $12.4 million. They are adjoining 2-storey conservation shophouses with freehold tenure, spanning a land area of approximately 2,343 square feet and gross floor area of approximately 5,947 square feet. This property has started contributing positively to the group rental income in FY 2021. Our freehold office complex in Perth has also performed well and continues to achieve full occupancy as at 31st December 2021, contributing significantly to the group rental income in FY 2021 that represent 7.9% of total revenue. Prospects. According to the Building and Construction Authority, BCA, construction demand for 2022 is expected to remain strong with public sector construction demand in the lead. The total construction demand for the year is expected to range between $27 billion to $32 billion with public sector demand expected to reach $16 billion and (sic) [ to ] $19 billion, making up about 60% of the projected demand. Over the medium term, BCA expects the construction demand to hold steady with a projection of between $25 billion and $32 billion per year from 2023 to 2026. As a forward-thinking and highly adaptable company, we will look to continue to broaden our skill sets and expertise in our core competency of infrastructure, transport and civil engineering. The group will continue to embrace technology and innovation to raise its productivity and competitive edge, as well as to enhance and upscale its workforce through continual training programs. In conclusion, on behalf of the Board, I would like to express my heartfelt appreciation for the steadfast and loyal support of our shareholders, clients, business associates and suppliers through the decades. I would also like to thank the management team for their unwavering effort and dedication to OKP. As we look ahead, I'm confident that with the strong support and commitment of our stakeholders, we will be able to work through challenges and propel OKP forward into a resilient and sustainable business. Thank you.