SINGAPORE (March 15): DBS likes OKP, the homegrown infrastructure and civil engineering companies, for its healthy orderbook, robust project pipeline and strong net cash position.
Started by Or Kim Peow in 1966, OKP specialises in the construction of roads, bridges and other infrastructures.
Most of its projects are from the public sector, awarded by Land Transport Authority (LTA) and Public Utilities Board (PUB).
OKP’s current net orderbook is about $330 million, with project pipeline extending till 2019.
The Building and Construction Authority (BCA) estimated the total construction contracts to be awarded in 2017 to be between $28 billion and $35 billion, with about 70% from the public sector, higher than the $26.06 billion contracts awarded in 2016.
Upcoming major projects include the North-South Corridor and construction of new MRT lines.
DBS also says there is the possibility of privatisation. Or and family own about 60% stake in OKP. Given 60% of its current market capitalisation is backed by net cash, which works out to be 23 cents per share, there is no necessity to tap the equity market to raise funds.
“We believe a 11x FY17F PE valuation is fair, based on peer average for the construction stocks listed on SGX. Target price works out to $0.45 per share... To be conservative, we
assume no new contract wins in our forecasts,” says DBS in the unrated Tuesday report.
Dividend yield is attractive at prospective yield of about 4%.
Shares of OKP are up 1 cent at 41 cents.
