OKP

This is going to be a morally reprehensible post.

It was just announced that OKP and LTA has mutually agreed to terminate the PIE-Tampines Expressway road viaduct contract, worth 94.6m in 2015.

OKP is a repeated safety-issue offender. The previous incident was in 2015 and they were fined $250,000.
I doubt they will be fine much more this time.

 

They have purchased an Aussie property for about 45m SGD and will yield, according to this article,
about 3m every year, despite a 20% vacancy. I suppose they got a pretty good deal, so this 45m is well spent.

Let's go ahead and assume that OKP will be fined 5m dollars. That will leave OKP with 87m worth of cash. That means that after deducting 48.708m worth of liabilities, there is 38.3m worth of cash, which is (based on 308,430,594 shares) 0.124 worth of cash per share.

There is also a 27m worth of receivables. Let's go ahead and take a 30% discount off that. This is worth about $0.06 a share. The undiscounted value of its receivables is 0.0875 a share.

OKP last closed at 0.295 per share. While this announcement sounds terrible, OKP does not have to pay for any demolition. The article claims that "...The replacement contractor will be responsible for completing the construction of the viaduct, including the demolition of any structures deemed unsafe." This means that OKP is not on the hook for any more things other than legal repercussions.

Given its grassroots leader links, I estimate that it will at most take them 5 years for the public to forget about this disaster, and that they will start getting projects again. Given the strength of its balance sheet, it is unlikely to go bankrupt. Heck, they might even just rename the company, delist, etc....

With the legal issue, headwinds in the property sector from government-initiated cooling measures, and possible temporary loss of management/leadership, the company will look ridiculously cheap if it get sold down to the low 0.2x a share.

The ugly side of capitalism and stock picking.