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

Good afternoon, everyone. We are pleased to take you through key highlights of our FY 2024 results and corporate developments. We remained resilient in FY 2024 despite the higher interest rate environment and macro uncertainties. We have continued to leverage on our strong track record in the construction and maintenance businesses to capitalize on opportunities. Our performance was further strengthened by various ongoing and newly awarded construction and maintenance projects as they progressed to a more active phase in FY 2024. At the same time, our expansion into property development and investment since 2012, 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 2024, we continue with our strategy of diversifying our earnings 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 have been fully sold and obtained TOP. Our portfolio of 3 freehold properties in Singapore held for investment purposes, namely 35 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 continued to generate recurring rental income in FY 2024. Meanwhile, for construction, the group remains supported by a healthy pipeline of projects. During the FY 2024, we are pleased to have secured 5 public sector contracts amounting to approximately $257.2 million. These are mainly for the construction of new cycling path network in various town islandwide, improvement works of roadside drains, upgrading of road directional sign at non-expressway roads, as well as the renewal of footpaths and related elements. We will continue to leverage on our strong track record and civil engineering expertise to capitalize on the strong construction demand. Financial review. In FY 2024, the group recorded a revenue of $181.8 million, boosted by higher contribution from the construction and maintenance segment. The 13.3% increase in the group revenue is mainly due to an 11.3% increase in the construction segment, and a 19.6% increase in the maintenance segment, which are partially offset by a 5% decrease in the rental income. Gross profit margin improved by 16.6 percentage points to 32% attributable to ongoing initiatives to enhance efficiency, productivity, and cost management. This was despite higher overhead costs and rising manpower costs. Net profit attributable to equity holders of $33.7 million was primarily due to improvement in gross profit margin. Balance sheet remains strong with higher free cash and cash equivalents of $124.3 million as at 31st December 2024, up from $81.7 million a year ago. Additionally, our healthy construction order book of $600.7 million, recorded a 15.8% jump from $518.6 million with projects all from the public sector extending to 2027. The construction segment constitutes 62.7% and is the primary contributor of the group FY 2024 revenue. Maintenance segment represent 34%, while rental income contributed 3.3% to the group total revenue in FY 2024. Revenue from the construction and maintenance segment increased to $114 million and $61.7 million, respectively, in FY 2024, mainly due to the higher percentage of revenue recognized from various ongoing and newly awarded construction and maintenance projects as they progress to move to a more active phase in FY 2024. Rental income generated from investment properties moderated slightly by 5% to $6.1 million in FY 2024 due to a lower rental income generated by the property located at 6-8 Bennett Street, East Perth, Western Australia as a tenant has vacated some units during the second half of 2024. The group gross profit surged by 135.4% to $58.2 million in FY 2024, from $24.7 million in FY 2023, and gross profit margin increased by 16.6 percentage points to 32%. The higher gross profit margin for FY 2024 was mainly attributable to the group ongoing initiatives to efficiency, productivity, and cost management despite the higher overhead costs and rising manpower costs. Dividend. To reward all our loyal shareholders for their continuous support, the Board has proposed a final one-tier tax exempt dividend of $0.01 per ordinary share. In addition, the Board has recommended a further dividend of $0.015 per ordinary share to further enhance shareholders' value. This proposed dividend payable on 27 May 2025, subjected to the approval of shareholders at the forthcoming Annual General Meeting represent a dividend yield of 6.5% based on share price on 24th February 2025 of $0.385. Business review. The core construction and maintenance segments continue to be a strong revenue pillar and core business with the public sector projects remaining as OKP's key contributor. We are supported by a net order book of $600.7 million, recorded a 15.8% jump from $518.6 million with projects all from the public sector extending to 2027. The next slide provide a quick snapshot of our ongoing projects for all from the public sector. The 74-unit Phoenix residence in Bukit Panjang has been fully sold and attained its TOP on 3rd January 2025. To drive recurring income, the group owns a portfolio of 3 investment properties in Singapore. This includes a freehold 3-storey shophouses 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. These properties have started contributing positively to the group rental income in FY 2024. Rental income from both Singapore and Australia, our freehold office complex in Perth, contributed 3.3% to the group rental income in FY 2024. Prospects. According to the Building and Construction Authority, construction demand for 2025 is expected to range between $47 billion and $53 billion in nominal terms in 2025. Normalized to real values, 2025 demand is projected to range between $35 billion and $39 billion, which is between 0.3% to 11.7% higher than pre-COVID level in 2019. The strong demand is underpinned by the expected award of contracts for several large-scale developments, including Changi Airport Terminal 5 and the expansion of Marina Bay Sands Integrated Resorts, alongside the public housing development and upgrading works. Other contributors include high-specification industrial building, educational developments, health care facilities as well as mechanical and engineering contracts for rail line are also expected to contribute to the increased demand. Over the medium term, BCA expects construction demand to range between $39 billion and $46 billion per year between 2026 to 2029. The medium-term demand is supported by developments, including T5, a steady pipeline of public housing developments and other urban rejuvenation developments. Due to the potential unforeseen risk arising for an uncertain global economic climate, the schedules and phasing of the projects are subject to change. Furthermore, T5 development is likely to be a one-off exceptional projects over the medium term. Overall industry demand could eventually moderate after this period. 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. At the same time, we are committed to smooth delivery of our projects. Additionally, as part of our commitment to preventing workplace incidents and building safer workplaces, the group will take collective responsibility by implementing safety measures to safeguard all employees and cultivate a safe 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 appreciation for the steadfast and loyal support of our shareholders, clients, business associates and suppliers through the decade. I would also like to thank the management team for their commitment and dedication to OKP. As we look ahead, I am confident with the strong support and commitment of all our stakeholders, we will be able to ride through challenges and stay resilient. Thank you.