Oka Corporation Bhd

WE first featured OKA (Fundamental: 2.4/3,

Valuation: 2.4/3) on January 9 when its price was 80 sen. Since then, the stock has trended higher, reaching a fresh 3-year of RM1.04 on April 20, making a handsome gain of 29.7%.

We still like the company for its exposure to Malaysia’s ramp-up in infrastructure spending and strong fundamentals.

To recap, OKA is a major manufacturer of pre-cast concrete products. It caters to customers around Peninsula Malaysia via six strategically located factories — in Kedah, Ipoh, Johor, Negeri Sembilan and Pahang.

The company’s competitive advantage lies in its numerous certifications, including those from the Public Works Department (JKR), National Water Services Commission (SPAN) and SIRIM QAS International. This allows OKA to supply to major infrastructure projects around the country.

Its project client list included the KLIA 2, LRT and East Coast Expressway. We believe OKA is well-positioned to benefit from proposed infrastructure projects like the RM5 billion West Coast Expressway and RM27 billion Pan Borneo Highway.

The company has grown steadily. Revenue rose from RM103 million in FYMarch2010 to RM145.4 million in FY14 while net profit expanded from RM3.9 million to RM13.4 million.

For 9MFY15, revenue grew 10.8% y-y to RM119.8 million while net profit grew an outsized 56.6% to RM13.3 million, thanks to increased sales of higher margin products. Steady earnings over the years have pared OKA’s debts, reducing gearing from 17.8% in FY10 to just 0.18% as at end-December 2014.

Last but not least, the company pays consistent dividends, between 3-3.5 sen per share over the last 5 years. Dividends for FY14 totalled 3 sen per share — after a 1-to-2 stock split in May — translating into net yield of 3%.

For 9MFY15, OKA paid a special dividend of 1 sen per share, after a 1-for-4 bonus issue (in November 2014). We expect a final dividend in the last quarter.

This article first appeared in The Edge Financial Daily, on April 29, 2015.