OKP Holdings

[Terry]

Hi dear value investors
I would like you to share some thoughts on this company as well as my valuation.

Looking into the company's balance sheet. It seems like their expansion does not require much $$. Why? They lease equipments from other companies to run their business another factor is require more bangla to work for them at less than $1k per month? :x and these equipments does not require depreciation as they do not belong to OKP.

Shares outstanding 264.8m
outstanding warrants not exercise yet 44.2m
Total diluted shares 309.1m

Using Yr 2010 june 30's balance sheet.
[Image: okpj.jpg]
I got a fair NAV/share of $60650000 or $0.19/share


Free Cash Flow after CAPEX average for the last 4 years because the company has generated positive cash flow with a very little cash outflow each year.
[Image: okp2.jpg]

Using 0%growth 4% discount rate I got $0.44 per share
This sum up with NAV/share = 0.19+0.44 = $0.63
MOS 33%

Earning per year has shown to be lesser compared to FCF. To see the difference I also put this in.
Using 5% growth 4% discount rate I got $0.309
Sum up with NAV/share = 0.19+0.309 = $0.505
MOS 6%

Will you take what appears on the P&L or take what appears on the CF statement?

[mrEngineer]

I have not read any books from Graham yet but I have some doubts with the valuation methods you have proposed.

Are you allowed to add NAV with FCF or EPY to estimate the actual value of the company? NAV is historical basis while FCF or EPY are future cashflows. When you are valuing using future cashflows, you can sort of ignore the initial capital invested (linked to NAV) if you assume that it can be recovered at the final period where you sell the shares.

I am not sure whether I am right or wrong. Valuation is very perceptive as well. Perhaps somebody can help to enlighten. Thanks.

[Terry]

Hello~
To your question. the NAV calculated to be the liquidating value of the company if the company were to disposed. So it will act as a safety level.
The Earning/CFC is future correct. These are the book mone/money you earning within these 10 years.

But this thought also came to me, Will you pay 9 years earning in advance for the money you speculate that the company will earn?

[lonewolf]

OKP Holdings just announced that their wholly-owned subsidiary Or Kim Peow Contractors (Private) Limited has won a SGD61,727,000 tender from LTA for the the design and building of the Interchange at TPE/ Sengkang West Road/ Seletar Aerospace Way.

Press Release

With the latest contract, the Group’s total gross order book stands at S$375.8 million based on secured civil engineering construction contracts, with projects stretching up to 2014.

Sounds impressive. The announcement also mention that 'The Contract is expected to contribute positively to, but has no material impact on, the earnings per share or net tangible assets per share of the Company and its subsidiary companies for the current financial year ending 31 December 2011.'

We see this statement all the time when companies announced new contract secured. NTA I can understand but why we should we not expect EPS to increase if the contract is expected to be recognised gradually over its execution period from 4 April 2011 to 3 October 2014. Surely there is progressive payment or is the payment only expect to come in after 31 Dec 2011?

[Musicwhiz]

We see this statement all the time when companies announced new contract secured. NTA I can understand but why we should we not expect EPS to increase if the contract is expected to be recognised gradually over its execution period from 4 April 2011 to 3 October 2014. Surely there is progressive payment or is the payment only expect to come in after 31 Dec 2011?

Depends on how the company defines "Material Impact". If the recognition for FY 2011 is small, then it has no material impact though it has a "positive impact". Future years may see a larger chunk being recognized as income.

[Jon-san]

Am happy to see OKP winning more contracts. Stable but boring company. As long as it's well run though, I couldn't really care less...

*vested*

[Musicwhiz]

Business Times - 07 Apr 2011

OKP unit bags $61.7m deal for roadworks

Order book now stands at $375.8m, with projects stretching to 2014

By JERMAINE NG

MAINBOARD-LISTED OKP Holdings has secured a $61.7 million design-and-build contract to under-take roadworks at the interchange at Tampines Expressway (TPE), Sengkang West Road and Seletar Aerospace Way, the company announced yesterday.

The contract is won by OKP's wholly owned subsidiary, Or Kim Peow Contractors, bringing the total number of contracts garnered by OKP this year to three.

The other two deals are a $28.5 million contract to widen Old Choa Chu Kang Road from Sungei Tengah Road to Lim Chu Kang Road and a $4.2 million contract to extend sewers in various locations, including the Admiralty Road West, Punggol Road and Cranwell Road areas.

The scope of work for the new project, which is slated for completion in October 2014, includes the construction and completion of roadworks along TPE and Jalan Kayu, including modification, widening, realignment and resurfacing, design and re-construction of two electrical substations, construction and completion of roadworks for Sengkang West Road/ Seletar Aerospace Way across TPE and all new slip roads, among others.

The company is also currently working on a $14.5 million contract from JTC and a $22.2 million PUB contract for road-raising works along Orchard Road.

Apart from public sector contracts, OKP is also working on the construction of a luxury condominium at Angullia Park worth $83.5 million, a project it secured last year.

For the financial year ended Dec 31, 2010, OKP posted a profit of $17 million, up 17 per cent from the previous year, and recorded a new high of $139.9 million in its turnover, an increase of 8 per cent.

The latest project will boost the company's total gross order book to $375.8 million based on secured civil engineering construction contracts, with projects stretching up to 2014.

OKP's share price closed at 65 cents yesterday, up three cents.

[Jon-san]

Am rather curious, why is it that OKP Holdings attracts so little attention from forummers here? There seems to be little or no interest, which is surprising considering that the company is well-run, produces consistent results and treats shareholders fairly well. Is there something inherently wrong with this quiet civic engineering and construction company or is the lack of interest due to more insidious reasons? Pardon me, i'm just stating an observation...

[karlmarx]

personally, i like businesses with stable cash flow. construction companies, especially okp, depend very much on govt policies to drive demand. business and earnings are therefore volatile. however, should a well-managed company as such be selling at extremely attractive valuations, i would place a wager.

[edragon]

About OKP, I always wondered the method they use to mitigate their risks as below:-
1) Their main material is bitumen (oil byproduct); whether they have a fluctuation clause in the material price as their contract can be for a period of upto 3 years but oil prices is only going one direction, their margins would suffer immensely.
2) Their works are very labour intensive; the Government intent and actual increased in work permits or other levees on foreign workers.
3) Weather; rainy weather and the amount of water have increased dramatically which affected down-time and or damages to just-laid road surfaces, water clogged areas, etc.
4) Increased claims from sub-contractors.

Any comments?