KUALA LUMPUR: OSK Holdings Bhd may continue its solid growth trajectory after its financial year results saw record-high revenue and strong earnings growth of 10.2 per cent year-on-year (YoY), according to Hong Leong Investment Bank (HLIB) Research.
HLIB said that the group is anticipated to achieve enhanced earnings, driven by improved progress billings as several high-rise projects progress further in construction, along with cost savings released from project handovers.
As a result, the research firm has adjusted its forecasts for financial years 2024 and 2025 (FY24/FY25) upward by 2.1 per cent and 3.6 per cent respectively, to accommodate the anticipated stronger loan growth and improved margins in the capital financing segment.
According to HLIB Research, OSK is expanding its loan portfolio.
"In FY24 and beyond, we anticipate improved profit before tax (PBT) margins for the capital financing segment, driven by the growing civil servant and Australia segments, which offer better net interest margins than conventional financing in Malaysia.
"Additionally, economies of scale are expected to improve for both segments as the loan portfolio size reaches optimal operational efficiencies.
"Capital financing is becoming the primary growth driver and earnings contributor for the group, with the potential to match the contribution from property development in two to three years, as we expect the segment to sustain a PBT compound annual growth rate (CAGR) of over 20 per cent," it added.
HLIB Research said the salary hike announced by the government is expected to increase civil servants' eligibility for loans, enabling them to borrow higher amounts.
The firm noted that OSK has a penetration rate of less than 0.7 per cent in civil servant financing, indicating a sizable untapped market with limited competition from major players.
For its property development in FY24, the company has set a sales target of RM1 billion, representing a 2.4 per cent year-on-year increase, with a launch pipeline of RM1.5 billion, up by 11.2 per cent year-on-year.
"The group is actively seeking new land banks, with negotiations underway for several parcels in Petaling Jaya, Negeri Sembilan, and Kedah," it said.
HLIB also emphasised the considerable expected expansion in the cable industry, propelled by the burgeoning data centre sector and Malaysia's transition to renewable energy sources.
OSK is enhancing its cable segment to seize upon this surge in demand, with a targeted capacity increase of 20 to 25 per cent by the end of FY24, it said.
