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

Good afternoon, everyone. We are pleased to take you through key highlights of our F1 2023 results and corporate developments. We have remained resilient in FY 2023. Notwithstanding ongoing macro uncertainties, we have continued to leverage on our strong track record in the construction and maintenance business to tap on opportunities. Our performance was uplifted by various ongoing and newly-awarded construction and maintenance projects as they progressed to a more active phase in FY 2023. At the same time, our expansion into property development and investment in 2012 (sic) [ 2023 ] has continued to provide us with recurring rental income. We remain on course to grow with purpose to realize our vision: to be a leading transport infrastructure and civil engineering company in Singapore, the region and beyond. In FY 2023, we continue with our strategy of diversifying our earning base and building on recurring income stream. We have made steady progress in our property business and investment properties during the year. Both our property developments, The Essence and Phoenix Residences has been fully sold and obtained TOP or set to obtain TOP in July 2024, respectively. Our portfolio of 3 freehold properties in Singapore held for investment purposes, namely Kreta Ayer Road and adjoining 2-storey conservation shophouses, 69 and 71 Kampong Bahru Road, have also contributed positively to the group performance. Our investment property in Australia continue to generate a steady stream of recurring rental income in FY 2023. Meanwhile, for construction, the group remains supported by a healthy pipeline of projects. During FY 2023, we are pleased to have secured 5 public sector contracts amounting to approximately $322.5 million. These are mainly for the construction of new cycling path network in various towns island-wide and separately for the maintenance and improvement of roads and commuter-related facility from southeast to the western region of Singapore as well as drainage improvement works. We will continue to leverage on our strong track record and civil engineering expertise to tap on this strong construction demand. Financial review. In FY 2023, the group recorded a revenue of $160.4 million boosted by higher contributions from all 3 business divisions. The 36.3% in the group revenue is largely due to increases of 25% and 75.2% in revenue from construction segment and maintenance segment, respectively, and positive growth of 1.7% from rental income. Net profit attributable to equity holders of $44.6 million from a turnaround from a loss of $1 million in FY 2022 was due largely on a higher revenue growth and other gains. Balance sheet remains strong with higher free cash and cash equivalent of $81.7 million as at 31st December 2023, up from $20.8 million a year ago. Additionally, our healthy construction order book of $518.6 million is a 44.8% jump from $358.2 million with projects all from the public sector extending to 2027. The construction segment constitutes 63.8% and is a major contributor of the group FY 2023 revenue. Maintenance segment represent 32.2%, while rental income contributed 4% to the group total revenue in FY 2023. Revenue from construction and maintenance segments increased to $102.4 million and $51.6 million, respectively, in FY 2023, mainly due to the higher percentage of revenue recognized from various ongoing and newly-awarded construction and maintenance projects as they progressed to a more active phase in FY 2023. Rental income generated from investment properties continue to see positive growth, increasing by 1.7% to $6.4 million in FY 2023 due to contribution from the property at 6-8 Bennett Street, East Perth, Western Australia, 35 Kreta Ayer Road, and 69 and 71 Kampong Bahru in Singapore. The group gross profit surged by 128.5% to $24.7 million in FY 2023 from $10.8 million in FY 2022, and the gross profit margin increased by 6.2 percentage points to 15.4%. The higher gross profit margin for FY 2023 was largely attributable to the group ongoing initiative to improve cost management despite the higher material cost and rising manpower costs. Dividend. To reward shareholders for their continued support, the company had previously paid an interim dividend of $0.005 per share on 27 September 2023. And the Board has now recommended a final dividend of $0.007 per share and a special dividend of $0.008 per share. This worked out to be a total dividend of $0.02 per share for FY 2023. This proposed dividend of $0.015 will be payable on 27 May 2024. The total dividend of $0.02 represent a dividend yield of 8.16% based on the share price of $0.245 as at 23 February 2024. Business review. The core construction and maintenance segments continue to be a strong revenue pillar and core business with public sector projects remaining as OPK key contributor. We are supported by a net order book of $518.6 million as at 31st December 2023, a 44.8% jump from $358.2 million a year ago, with projects extending to 2027. The next 3 slides provide a quick snapshot of our 16 ongoing projects, all from the public sector. On the property development front, the group joint venture essential project, The Essence has achieved full sales and obtained TOP. The 74-unit Phoenix Residences in Bukit Panjang has also been fully sold and is expected to attain its TOP in July 2024. To drive recurring income, the group owns a portfolio of 3 investment properties in Singapore. This includes a freehold 3-storey shophouse situated at 35 Kreta Ayer Road as well as a pair of freehold 2-storey conservation shophouses located at 69 and 71 Kampong Bahru Road. This property has started contributing positively to the group rental income since FY 2021. Our freehold office complex in Perth has also performed very well. Overall, rental income from both Singapore and Australia contributed 4% to the group rental income in FY 2023. Prospects. According to Building and Construction Authority, construction demand for 2024 is expected to remain strong with public sector construction demand in the lead. The total construction demand for the year is expected to be at a higher range of between $32 billion to $38 billion as compared to last year, with the public sector demand expected to reach between $18 billion and $21 billion. Over the medium term, BCA foresees that the public sector will continue to lead the demand and is expected to contribute $19 billion to $23 billion per year from 2025 to 2028. As a forward-thinking and highly adaptable company, we will continue to embrace technology and innovation to raise our productivity and competitive edge and to better manage cost inflation. Additionally, as part of our commitment to prevent workplace incident and building safer workplace, the group will take collective responsibility by implementing safety measures to safeguard all employees and cultivate a strong working environment. We are also dedicated to prioritizing the environment sustainability in support of Singapore Green Plan, contributing to a sustainable future. In conclusion, on behalf of the Board, I would like to express my heartfelt gratitude for the support of our shareholders, clients, business partners, and suppliers through the years. I would like to thank and commend the management team for the strong leadership and good teamwork. As we move ahead, I'm confident that each of you will give your dedication and very best to make OKP resilient and steadfast as to achieve a sustainable future. Thank you.