Price Target : 12-Month S$ 0.49 (Prev S$ 0.54)
Margins, order wins below expectations
• Headline 3Q12 earnings of S$2.4m were below expectations on slower order wins, higher costs and provisions
• FY12F/FY13F earnings cut by 34%/14% on slower order wins, lower margins
• Maintain HOLD with lower TP of S$0.49, forecast dividend yield of 3.7% no longer attractive
Order wins have lagged expectations this year. Headline 3Q12 earnings of S$2.4m (-50% y-o-y) was below expectation due to slower than expected order wins, higher labour costs and a one off provision of S$1.4m on doubtful receivables. Our initial order win expectation for FY12F was S$148m, but as order wins have come in slower than expected, we now expect FY12F order wins to be c.S$138m (7% lower).
Trim margins on slower project rollouts, labour costs. We believe slower project rollout by the government has caused tenders to be more competitive. Together with higher labour costs due to labour shortage in the market, we trim our FY13F gross margin assumptions from 26% to 25%. Our FY13F net profit is hence reduced by 14%. (FY12, -34% on slower order wins, lower margins)
Maintain S$130m order win assumption for FY13F on robust project pipeline. Industry project pipeline remains robust in FY13F. Work on the S$18bn Thomson MRT line is due to commence next year. Other projects commencing include North South Expressway, and road improvement works on Leonie Road/Bukit Brown. OKP already has an outstanding order book of S$346m (>3x book to bill) as of 3Q12, keeping it busy till FY14F. With a robust project pipeline and strong order book, our FY13F/FY14F order wins assumption stand at S$130m each.
Maintain Hold with lower TP of S$0.49. With forecast earnings expected to drop by 53% in FY12F, we cut our TP to 49cts. Dividend yield is no longer attractive at a forecast 3.7% for FY12. Maintain HOLD.
Source/Extract/Excerpts/来源/转贴/摘录: DBS Vickers Research
Publish date: 24/10/12