OKA (7140) - OKA - Topping The Packs

Oka Corporation Berhad (OKA - 7140) had a history dated back then to 1981 where OKA group of companies had been involved in manufacturing of precast concrete products that are used in the drainage, sewerage, buildings, and water related infrastructure works. Oka gained public listed into the 2nd board of KLSE at 2002, and subsequently transferred to the main board successfully in year 2003. Currently, albeit the total market capitalization of RM 167 million, OKA is one of the largest and leading precast concrete manufacturer in Malaysia.

While the local Malaysian economy outlook might be challenging in 2015 and 2016, the cement industry continue to show consistent rising demand due to the local government commitment in rolling out huge public infrastructure project such as MRT 1, MRT 2, LRT 3 and highways.

However, the introduction of GST, the weakening of MYR towards the USD continue to be a huge challenge to local cement player. The local cement industry had been seeing tight competition between competitor, hence weakening the profit margin of the industry. In order to champion the packs, OKA had focused towards product specialization and differentiation and better cost control in order to continue growing further.

OKA and the Cement Industry in Malaysia

A common house name for  cement player in Malaysia will see easy mentioned such as LaFarge, YTL Cement, Tasek and Hume Industry Berhad. Of course, these are the long established name in Malaysia that command big volume in the industry. Given the steady track of record as well as consistent nature of dividend payment towards the shareholder, the established cement player that are listed in the KLSE will easily enjoy a PER of x20, such as Tasek.

The property development sector makes up to 50-60% of total cement demand in Malaysia. However, due to the recent dishing out of public infrastructure project such as MRT, LRT and highways, there is an uprising demand in the precast concrete product.

Oka offered various of precast concrete product that caters for the MRT, LRT, highway, water treatment plant, sewerage plant as well as drainage system and bridges.

The strategic distributed location of Oka's plant and factory in the Peninsula Malaysia is one of the biggest key point for Oka to capture the growth from the rising state of Penang and Johor.

Key highways project such as DUKE extension, WCE, DUKE, SUKE and EKVE continue to underpinned consistent growing demand towards Oka precast product, such as its superior "Porous Pipes" that champion over all other competitor. Porous pipes are essential for land drainage for the rapid removal of water, hence a critical component in the construction of road.

Oka past revenue performance

What is even interesting in Oka is it's relatively cheap valuation compared to all it's peers.
Currently, with a cumulative 3 quarter EPS of 9.7 cents, with the final quarter and FYE 2016 result announcing in May this month, Oka can easily see a total EPS of 13 cents for FYE 2016.

With the current price of RM 1.06, Oka is greatly undervalued. While it's peer are trading at PER x 20, should Oka take a valuation of PER x 12 based on projected EPS of 13 cents for FYE 2016, Oka is easily carrying a valuation of RM 1.56.

Oka strong balance sheet with a net cash of RM 17 million will continue to ascertain shareholder on
- Expansion and Growth
- Consistent Dividend
- Strong Balance Sheet to Weather Economic Ups and Downs

Technical Outlook

It is noticeable that Oka had been riding in a strong uptrend despite the lackluster performance for most of the equity due to the challenging global environment. Oka uptrend had to give credit to strong performance in the past 3 quarterly result.

According to the technical reading, Oka is resting on support price of RM 1.04. Strong open market accumulation had been seen in 21st and 22nd of April 2016, with solid bullish candle marked with strong volume of 2.94 million in 21st and 5.28 million in 22nd of April.

Oka is foreseeable to deliver an EPS of not lesser than 3 cents in 4Q FYE 2016, which will be the main catalyst for Oka to rev up to RM 1.20 as a primary target.

Conclusion
Oka is currently a hot investor target based on
- Strong quarterly display in past 3 quarter consistently, marking a cumulative EPS of 9.7 cents
- Growing demand in precast concrete product, underpinned from large public infrastructure project
- Good dividend policy
- Strong cash position of RM 17 million
- Technical chart in uptrend mode at support line buy in opportunity

Bone's TP : RM 1.20

Cheers and have a nice day

Regards,
Bone

OKA (7140) - OKA - Topping The Packs 
http://bonescythe.blogspot.my/2016/05/oka-topping-packs.html