OKP Holdings

[vicom76]

I was hoping OKP will dish out at least 3 cents, if not 4 cents dividend.

Disappointed with only 2 cents.

[shanrui_91]

a quick look at it shows that the main reason why cash flow drops so sharply is due to a reversal of $21m inflow in trade payable to a $25m cash outflow. This caused a drop in trade and other payables under Current liabilities from $78m to $53m. There's still a sum of $35m to be paid to non-related partners.

With a $92m in cash and equivalent, i will not say it is disappointing. Treat it as the company is paying down its debt to improve its balance sheet, which is good for logn-term shareholder, but not for short-term's.

(not vested)

[FFNow]

a quick look at it shows that the main reason why cash flow drops so sharply is due to a reversal of $21m inflow in trade payable to a $25m cash outflow. This caused a drop in trade and other payables under Current liabilities from $78m to $53m. There's still a sum of $35m to be paid to non-related partners.

With a $92m in cash and equivalent, i will not say it is disappointing. Treat it as the company is paying down its debt to improve its balance sheet, which is good for logn-term shareholder, but not for short-term's.

(not vested)

True. But the question is, going forward, will this be a recurring thing where cash flow will be affected due to trade payables?

[freedom]

the cash flow of construction company would always be volatile due to the nature of the business. In the early stage, payment to subcontractor and suppliers will be accrued in the balance sheet as trade and other payable(better cash flow). In the late and completion stage, you must pay the subcontractor and suppliers(significant cash outflow).

[VIChris]

vicom76,
If you noticed, their dividend given is always at May and Aug. Lets see whether there are further dividend down the road.

So far, I would still see the company as stable now looking at their Cash per share at $0.31(very healthy) and low gearing of 0.1.
Not mentioning that they are surrounded with plentiful of great business opportunities, from the new North South highway to 750 millions worth of drainage projects & etc...

Lets wait for OKP management's explanation on the drop in FCF.

[FFNow]

From OCBC Research -

OKP Holdings: Increased investment in quoted securities

OKP Holdings (OKP) last night announced that it has increased its investment in quoted securities to S$6.7m, from S$2.2m previously. The latest acquisition brings quoted securities to 10% of the group’s NTA of S$67.3m. Management disclosed that these quoted securities are investment grade perpetual bonds with an average yield of more than 5%. Furthermore, more than 85% of the securities are denominated in S$. OKP said the rationale to buy these securities is to derive a higher yield on its cash kitty that amounted to S$92.5m at the end of FY11. In addition, these securities may later be used as collaterals for OKP’s financing of its property development projects, and with the relevant interest income used to offset the financing costs.

http://www.remisiers.org/cms_images/rese...13-OIR.pdf

[weijian]

From OCBC Research -

OKP Holdings: Increased investment in quoted securities

OKP Holdings (OKP) last night announced that it has increased its investment in quoted securities to S$6.7m, from S$2.2m previously. The latest acquisition brings quoted securities to 10% of the group’s NTA of S$67.3m. Management disclosed that these quoted securities are investment grade perpetual bonds with an average yield of more than 5%. Furthermore, more than 85% of the securities are denominated in S$. OKP said the rationale to buy these securities is to derive a higher yield on its cash kitty that amounted to S$92.5m at the end of FY11. In addition, these securities may later be used as collaterals for OKP’s financing of its property development projects, and with the relevant interest income used to offset the financing costs.

Is this a good way to spend your cash for a civil and infrastructure construction company?
If there are surpluses, the better way would be to return cash, or expand into your expertise fields via organic growth/acquisitions?

Investing into financial products by OKP just reminds me of the TCs which lost $ by investing in Lehman Bro's related structured products in 2008.

In a black swan event, such "quoted securities" which are held as collateral may drop in market value or they may be liquidated at a severe loss if the bank seizes them. Of course, if nothing happens, their net margins will be boasted in the next qtrly financial report.

[VIChris]

Is this a good way to spend your cash for a civil and infrastructure construction company?
If there are surpluses, the better way would be to return cash, or expand into your expertise fields via organic growth/acquisitions?

Investing into financial products by OKP just reminds me of the TCs which lost $ by investing in Lehman Bro's related structured products in 2008.

In a black swan event, such "quoted securities" which are held as collateral may drop in market value or they may be liquidated at a severe loss if the bank seizes them. Of course, if nothing happens, their net margins will be boasted in the next qtrly financial report.

Very Interesting view you have there. Wondering what securities they have bought.

As the company management is always very conservative, careful in their business dealing and the invested amount is small as compared to their cash holding, I will not worry that much for now.

What I will be interested is their business plan in the next 3 to 5 years and how they will grow their businesses and not just depending on Singapore government projects.

[yeokiwi]

Very Interesting view you have there. Wondering what securities they have bought.

"Management disclosed that these quoted securities are investment grade perpetual bonds with an average yield of more than 5%."

Investment grade
> 5% yield
> 85% of the securities are in S$

=> MLT perpetual bond??

[FFNow]

I will also not worry too much as I feel management is very prudent and the money invested is very little like VIChris said. The bond OKP has invested in is unlike the "Lehman Bro's related structured product" and it's invested mainly in SGD. Instead of earning less than 1% by letting the money sit in the bank, why not earn at least 4% more? The perps can give income to the company and at least cover current inflation levels.

Going forward, I strongly believe OKP will go into property as hinted in their Q&A and also in the research report above. If OKP enters at a time when the property market comes down, timing will be great. Even if not, OKP has a long-term view (as stated in Q&A) and booms and busts are all part of the cycle.