Summary

• OSK Holdings Bhd’s (OSK) 2QFY22 net profit rose 2.5% YoY to RM106.2m, driven by stronger contribution from the industries segment, while the hospitality segment has returned to the black. Revenue for the quarter rose 25.2% YoY to RM334.7m. A single tier interim dividend of 2.0 sen per share, payable on 6th October 2022 was declared.

• For 1HFY22, cumulative net profit declined 12.5 YoY to RM192.5m. The reported earnings make up to 46.5% of our forecasted net profit of RM414.1m. We reckon that the figures to be in line on the back of sequential earnings improvement in line with the economic recovery.

• Moving forward, OSK’s property development unbilled sales of approximately RM1.0bn (up from RM885.0m recorded as at end-1Q22) will sustain earnings visibility over the next 18-24 months. In the meantime, balance landbank at 1,936- ac that carries and estimated gross development value (GDV) of RM14.30bn, mainly from 2 major townships will keep the segment busy over the long term.

• We gather that occupancy rates at Plaza OSK, Faber Towers and Atria Shopping Gallery remains relatively healthy. Meanwhile, the construction segment will be supported by an outstanding orderbook of RM378.4m that will be recognised progressively and will be replenished from new internal property projects launches. Loan portfolio remains stable at RM834.3m with the solid collateral value able to weather any further increase in non-performing loans.

• The hospitality segment will continue to ride onto the re-opening of international borders and we gather that the improved international passenger movements bode well towards a gradual tourism recovery trend. Moving forward, OSK plans to reopen DoubleTree by Hilton Damai Laut Resort upon completion of refurbishment tentatively in September 2022.

• We continue to favour OSK, on the back of (i) prudent new property development launches to avoid an overhang of unsold stocks scenario, (ii) stable loan portfolio and (iii) dividend income from strategic investment in RHB. We reckon that demand for affordable housing remains on the fore with the group’s future launches continue to place great emphasis through competitive pricing.

Source: Mplus Research - 30 Aug 2022