"The structural nature of these projects provides a supportive tender pipeline and reinforces OKP’s role as a niche public-infrastructure contractor," he adds.
Chen notes that with a net orderbook of $760.7 million as at May 28 including multi-year contracts from LTA, OKP enjoys strong earnings visibility through 2031, which means it can reduce its reliance on short-cycle tender wins, and strengthen visibility over medium-term revenue recognition.
Meanwhile, the company has, over the years, built up a strong and resilient balance sheet, which gives it the base to bid for more contracts.
"OKP’s sizeable cash position and conservative balance sheet provide an important buffer against project execution risks, cost inflation and working-capital volatility.
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"The strong liquidity position also supports performance bonding, procurement flexibility and the ability to bid for larger government-backed infrastructure projects," adds Chen.
The analyst too that OKP has shown the resilience of its margin by disciplined tendering and public-sector track record. Although the construction sector faces higher labour, material and energy costs, OKP’s established execution track record, public-sector focus and disciplined bidding approach should support margin stability.
"As industry requirements around manpower, productivity and compliance increase, stronger contractors such as OKP are better positioned to capture quality projects and convert backlog into sustainable earnings," he adds.
Chen's target price of $1.31 is based on a DCF-derived equity valuation with a 10% WACC and 2% terminal growth rate.
OKP shares changed hands at 78 cents as at 9.37 am.
