OKP

OKP: Results were weak, as expected by the Street. FY12 Revenues declined 5% to $104.5m with gross profit margins declined from 39.3% in FY11 to 22.4% in FY12. Earnings declined 53.4% to $12.4m. The decrease in revenue from the maintenance segment was due mainly to the substantial completion of existing maintenance projects. The lower gross profit margin was largely attributable to lower profit margins for new and current projects as a result of a more competitive pricing environment and costs which were higher than expected for some sewer-related projects during FY2012. Mgmt stated that the outlook for the Singapore construction industry for the next twelve months remains positive but competitive. Growth is likely to be supported by a stronger public housing and infrastructure construction pipeline. Group cited increasing manpower supply constraints at the supervisory level and increasing labour costs. Its construction orderbook remains strong at $376.6m, with contracts lasting up to FY15, but its narrowing margins and feeble 4Q12 showing suggest difficulties in converting future revenue growth into profits. OKP declared a final cash dividend of 1.5¢/share, down from 2¢ in FY11. OCBC has a HOLD rating with TP of $0.46; TP under review.