Real estate sector OSK’S key revenue contributor
“The company’s executive chairman, Tan Sri Ong Leong Huat is a very shrewd businessman with a keen eye in identifying growth sectors,” he says.
Lau expects the share price to reach as high as RM1.80 by the end of this year with a support of RM1.20.
OSK executive chairman Tan Sri Ong Leong Huat is the majority shareholder of the company, with a combined direct and indirect deemed interest of 55.45% of OSK shares as reported in the group’s FY22 annual report.
He is supported by his children, Ong Ju Yan, who serves as the group managing director, Ong Ju Xing, the deputy group managing director and Ong Yee Ching, CEO of OSK Foundation.
Hong Leong Investment Bank (HLIB) Research says in its recent report that it views OSK as a laggard to its peers as the current share price has yet to fully reflect the value of the group’s capital financing and cables businesses.
The research house has maintained a “buy” call on OSK with a higher target price of RM2.04 from RM1.77 previously and says the group’s industries and capital financing segment already make up nearly half of the counter’s current share price.
“The bright prospects of capital financing and cables are reflected in the valuation and share price of OSK’S listed peers, namely, RCE Capital Bhd for capital financing and Southern Cable Group Bhd for cables.
“For instance, RCE Capital’s share price surged 92.3% in 2023 and is currently trading at a trailing PE ratio of 15.8 times.
“On the other hand, Southern Cable’s share price surged 46.3% in 2023 and is currently trading at a trailing PE of around 16.3 times.
“By applying the same PE multiple as these peers on OSK’S estimated trailing earnings per share, we derived a value of 23.2 sen per share for its industries segment and 45.6 sen per share for its capital financing,” the research house said.
OSK saw an increase of 9% year-on-year (y-o-y) in its 3Q23 net profit to Rm123.03mil, or 5.97 sen per share, while its revenue expanded by 25% to Rm433.64mil.
For the nine months to September 2023, the group’s net profit rose to Rm369.16mil from Rm303.04mil from the corresponding period a year ago, while revenue increased to Rm1.16bil from Rm988.19mil.
HLIB Research said the cables segment is currently operating at around 85% utilisation rate which is close to its practical limit while the IBS segment is currently operating at 67% utilisation rate, which has more than doubled from 30% at the end of 2022.
Onto its property segment, which remains as OSK’S key revenue contributor, the group’s flagship integrated development, Melbourne Square officially launched Phase 2, also known as BLVD, in October 2023 with a take-up rate of about 50%.
The management says OSK Property’s domestic launches should pick up again in 2024 as the group views the market conditions to be more favourable.
As at Sept 30, 2023, OSK’S property development division had effective unbilled sales of Rm1.2bil with minimal unsold completed stocks.
Moreover, the group’s total land bank of 1,994 acres garners an estimated effective gross development value of Rm15.5bil with land parcels located in the Klang Valley, Sungai Petani, Butterworth, Kuantan, Seremban and Melbourne in Australia.
Going forward, the management says the group aims to grow steadily over the long term through executing carefully planned strategies and ensuring that it delivers healthy risk-adjusted returns that benefit all its stakeholders.