"We continue to believe OKP to be one of the main beneficiaries of Singapore’s construction boom," says Yon, who values OKP at 8x FY2025 earnings of $37.1 million.
Besides earnings growth visibility, Yon points out that OKP’s share price is further backed by its current 35 cents per share net cash and 26 cents per share of investment properties, which continues to generate recurring income. "OKP’s cash position is also expected to build up with its strong cash flow position," adds Yon.
According to Yon, the latest contract, announced on May 30, is an indication of OKP’s capabilities to take on large contracts and highlights LTA’s trust as this is the 4th government contract award.
The latest contract is part of Singapore's bid to build 1,300km of cycling paths by 2030 and approximately 50 to 60% of the network already completed, OKP is in pole position to secure additional contracts as new tenders are progressively rolled out, says Yon.
Just to be sure, Yon says that construction is lumpy by nature. Project startup costs can potentially eat into FY2025 margins.
"As such any assessment of OKP should be considered from a yearly perspective rather than a 5-month period. Hence, we have kept revenue targets constant and only made conservative upward revisions to FY25 net profit," he says.
OKP shares changed hands at 78 cents as at 2.38 pm, up 0.65%.
