In his Apr 1 report, Yon says: “Additionally, with its operating leverage, OKP is better poised to capitalise on the construction boom, allowing it to deliver record profits and potentially raise dividends in FY2025.”
Furthermore, he believes that the stock’s valuation is undemanding, noting that unlike many construction firms relying on financial leverage, OKP is cash-rich, which allows a strong margin of safety should liquidity margins arise.
“This financial strength also supports the potential for higher dividends, especially given that the majority owner, the Or (Or Kim Peow) family, holds a 54.9% stake in the company,” says Yon.
With this, his TP is based on an 8 times forward price-to-earnings ratio (P/E), which he notes is in-line with the peer average.
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Yon concludes that OKP’s 35 cents per share net cash and ascribed 8 times P/E target is conservative, representing an around 21% discount to the trough P/E of 10.1 times in FY2016, which is when previous peak earnings came in at $14.5 million.
As at 2.37 pm, shares in OKP Holdings are trading 3 cents higher or 5.09% up at 62 cents.
