OKP : Reports 21.7% Growth In Net Profit Attributable To Equity Holders Of S$1.2 Million In 1H2022

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For Immediate Release

OKP HOLDINGS LIMITED REPORTS 21.7% GROWTH IN NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS OF S$1.2 MILLION IN 1H2022

• Recovery in construction and maintenance segments in 1H2022 driven by resumption of construction activities, with gross margins improving to 5.9% reflecting effective cost management initiatives
• Healthy order book of S$279.4 million1, with revenue visibility extending to 2025
• Robust balance sheet, with free cash and cash equivalents of S$33.3 million
• To explore global business opportunities to broaden its foothold in property development and investment through strategic partnerships with esteemed partners

1 As at 30 June 2022.

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Singapore, 8 August 2022 - MAINBOARD-LISTED infrastructure and civil engineering company, OKP Holdings Limited (胡金标控股有限公司) ("OKP" or the "Group"), today reported a 18.9% increase in revenue to S$53.6 million for the half year ended 30 June 2022 ("1H2022") as compared to S$45.1 million in the previous year ("1H2021"), mainly due to higher contributions from the construction and maintenance segments of S$8.7 million, partially offset by a decrease in rental income. Net profit attributable to equity holders of S$1.2 million was reported for 1H2022, 21.7% higher than the S$1.0 million recorded in 1H2021.

Group Managing Director, Mr Or Toh Wat (胡土发), said, "We are pleased with our performance for 1H2022, buoyed by recovery in the local construction sector. Notwithstanding challenges brought about by the ongoing Russia-Ukrainewar which has led to higher commodities and energy costs, we were able to effectively manage our expenses and recorded higher margins for our construction and maintenance segments. We remain cognizant of market volatilities and uncertainties and will continue to respond nimbly to constantly stay ahead of any changes.

Despite disruptions from the COVID-19 pandemic, OKP remains in good financial shape, backed by a strong order book that would give us revenue visibility up to 2025. This reflects the resilience in our business model, and we remain confident of navigating any challenges that may lie ahead of us. We will also continue to diversify and build a recurring income stream from our property investment business, and we seek to capitalise on good asset investment opportunities as and when they arise."

Review of Performance

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The overall 18.9% increase in the Group's revenue in 1H2022 was largely due to increases of 24.6% and 11.2% in revenue from the construction segment and maintenance segment respectively, partially offset by a 4.2% decrease in rental income.

Revenue from both the construction and maintenance segments increased to S$37.3 million and S$13.0 million respectively, mainly due to the higher percentage of revenue recognised from a number of existing construction projects during 1H2022 as the construction sector rebounded post COVID-19. In comparison, there was a temporary cessation of construction activities in compliance with the government's COVID-19 measures in 1H2021. The construction and maintenance segments are the major contributors to the Group's revenue, representing 69.6% and 24.3% of the Group's 1H2022 revenue, respectively.

The Group's rental income from investment properties decreased by 4.2% to S$3.3 million in 1H2022, mainly due to the loss from foreign exchange translation arising from the rental income generated from the property at 6-8 Bennett Street, East Perth, Western Australia pursuant to the revaluation of Australian dollar to Singapore dollar. Overall, the Group's rental income contributed 6.1% to the Group's total revenue in 1H2022.

Accordingly, the Group's gross profit increased by 11.4% to S$5.0 million in 1H2022. Overall gross profit margin declined by 0.6 percentage points to 9.3% as gross profit margin for the rental income segment fell by 5.0 percentage points to 62.2%. This was mitigated by an improvement in gross profit margin for the construction and maintenance segments, which increased from 5.3% for 1H2021 to 5.9% for 1H2022, mainly attributed to the Group's ongoing initiatives to improve cost management, despite the higher material costs and rising manpower costs.

Other gains had decreased by S$1.3 million to S$1.0 million in 1H2022, from S$2.3 million in 1H2021. The decrease was mainly due to lower receipt of payouts and rebates from the government, and an increase in loss on foreign exchange arising from the revaluation of assets and liabilities denominated in Australian dollar to Singapore dollar.

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Net profit attributable to equity holders stood at S$1.2 million for 1H2022 as compared to S$1.0 million for 1H2021.

Balance Sheet Highlights

The Group's balance sheet remains strong with net tangible assets ("NTA") of S$122.4 million while NTA per share was 39.88 Singapore cents as at 30 June 2022.

OKP's free cash and cash equivalents stood at S$33.3 million as at 30 June 2022, compared to S$56.3 million a year ago.

Earnings per share (basic) for 1H2022 stood at 0.39 Singapore cents, as compared to 0.32 Singapore cents in 1H2021.

Based on OKP's closing share price of S$0.174 as at 8 August 2022, the Group's market capitalisation is S$53.7 million.

Outlook

Based on advance estimates released by the Ministry of Trade and Industry ("MTI") on 14 July 2022, Singapore's economy grew by 4.8% on a year-on-year basis in the second quarter of 2022, extending the 4.0% growth recorded in the previous quarter. MTI also maintained Singapore's Gross Domestic Product ("GDP") forecast at 3.0% to 5.0% for 2022, with growth likely to come in at the lower half of the forecast range.

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Construction

According to MTI, the construction sector grew by 3.8% year-on-year in the second quarter of 2022, faster than the 1.8% growth in the previous quarter. Construction activities picked up during the quarter, supported in part by the relaxation of border restrictions on the inflow of migrant workers. In absolute terms, the value-add of the construction sector remained 23.7% below pre-pandemic levels due to continued labour shortages as the inflow of migrant workers would take time to recover. On a quarter-on- quarter seasonally-adjusted basis, the sector expanded by 1.9% in the second quarter, moderating from the 2.9% growth in the first quarter.

With the gradual pick up in construction activities, supported in part by the relaxation of border restrictions on the inflow of migrant workers, the Group will continue to actively monitor the progress to ensure smooth development and completion of its projects. The Group will also continue to leverage on assistance and support provided by the government for the construction sector during this period to cushion the impact of the pandemic and ensure the sustainability of the business.

According to a projection by the Building and Construction Authority ("BCA") released on 26 January 2022, the total construction demand in 2022 is expected to be between $27 billion and $32 billion, while total construction demand in the medium term from 2023 to 2026 is expected to reach between $25 billion and $32 billion per year.

The public sector is also expected to lead in the demand, contributing $14 billion to $18 billion per year from 2023 to 2026, supported by public housing developments, and various major healthcare and infrastructure developments in the pipeline, such as MRT projects including the Cross Island Line and the Downtown Line Extension, and the redevelopment of Alexandra Hospital.

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