OKP Holdings

OKP Holdings: OCBC maintains HOld. Note that OKP’s order book of $385.9m (as at 1 Nov) gives it excellent revenue visibility over the next two years. But the group has found it difficult to compete for work on the new MRT lines and is now exploring possible tie-ups with other firms to improve its chances of winning such projects. Though OKP’s revenues will likely be sustained by strong demand for public construction work in Singapore, we expect its gross margins to shrink from 20-25% now to <20% in future, due to increased competition and rising manpower costs. House lowers fair value estimate for OKP from $0.53/share to $0.46/share, or 11x its projected FY13 earnings. Though its 9M12 results suggest that its FY12 financial performance is likely to be lacklustre, expect to see more support for OKP’s share price in the coming months as it recognises more revenue from its current project pipeline.