Background and Core Business

Founded in 1981, Ipoh-based OKA Corporation Bhd and its subsidiary companies are now one of the largest precast concrete manufacturers in Malaysia. They are listed on the main market, under the Industrial Products sector. Market capitalisation is approximately RM206.75 million. Their FY2016 ended in March 2016 with their FY2016 annual report just released on 29 July 2016.

OKA is a major supplier of concrete pipes, concrete spigot & socket pipes, jacking pipes, box culverts, L-shape retaining wall units, U-shape drain, concrete porous subsoil pipes, ready mixed concrete, concrete septic tanks, precast manhole components, reinforced and pre-stressed concrete square piles, Arch Bridge System, pre-stressed beam, IBS components, jetty components and other concrete products to cater for Malaysian’s infrastructure, sewerage, construction and highway industry. Basically, they have been involved with almost all notable infrastructure projects in the past, including KLIA2, SMART, MRT projects etc.

Financial Brief and Ratios (Historical)

OKA reported a slightly lower revenue (a drop of 6.83%) compared to FY2015 but managed to retain higher net earnings instead. In fact, this has been the highest net earnings reported in the past 5 years. Net profit margins have also improved drastically in FY2016. Investors now enjoy an EPS of 13 sen, with a relatively low PE ratio. ROE is at a healthy 14%, characteristic of growth companies.

OKA is currently trading cum dividend at 3.5sen per share with the Ex-date on 2 Nov 2016. This translates to approximately a dividend yield of 5.54%. OKA has been faithfully rewarding its long term investors with dividend payments for more than 5 years; its lowest yield was in 2014 at 3.53%.

The balance sheet for OKA is strong. Over the years, they have pared down their reliance on debt, as shown in the Total Debt to Equity Ratio. Both Cash and Current Ratios show resilience too. OKA has been enjoying positive free cash flows for the past 5 years, with estimated figures at RM26 million for FY2016.

Next quarterly results announcement should be on the month of Aug 2016 for Q1 results.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – OKA

The 6-month weekly iVSAChart for OKA shows a clear uptrend which commenced around mid-Feb 2016. During the course of the uptrend, overhead supply was uncovered on 2 occasions, once in late Feb 2016 and a second time in Apr 2016 as signaled by the Signs Of Weakness (red arrows). Retrospectively, demand then overcame supply in these 2 scenarios as confirmed by the emergence of more Signs Of Strength (green arrows) during price retracements, indicating strong hands supporting and accumulating more stocks.

OKA is closing at its all-time high of RM1.34 and probably bolstered by its strong performance and dividend announcement.

Until strong Sign Of Weakness appears, we have reason to believe that there is more upside room for OKA especially for longer term investors, with anticipation of a favorable quarterly results to be announced this month. However, with news like dividend announcement already out, short term traders should be cautious about the risk to reward ratio if deciding to take entry position at this juncture.

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This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock. If you decide to buy or sell any stock, you are responsible for your own decision and associated risks.