Executive Summary

Global Resource Construction Ltd (formerly GRC Limited, formerly OKH Global Ltd) is a Singapore-listed company that was fundamentally transformed in April 2025 through a reverse merger with Chip Eng Seng Construction Pte Ltd, one of Singapore's oldest and largest public housing contractors. The construction business -- now rebranded as GRC Construction -- dominates the entity, contributing 98.8% of revenue and 95.4% of profit in 1H2026. With a $2.9 billion order book, A1 contractor classifications, and Singapore's robust public housing pipeline, the company has genuine operational substance. However, at SGD 0.135 per share, the stock trades at 2.9x book value and an implied ~14x trailing P/E on annualized 1H2026 earnings -- rich for a low-margin construction business. The financial history is messy, the corporate structure is complex, and the moat is essentially nonexistent. WAIT for a significantly lower price.

Investment Thesis (3 sentences): GRC is a low-margin construction business dressed up in a reverse-merger shell, now genuinely backed by Chip Eng Seng Construction's $2.9B order book and 40+ year track record in Singapore public housing. The transformation is real, but construction is structurally a poor business -- thin margins (~4% net), project concentration risk, and zero competitive moat beyond licensing credentials. The stock's 331% run-up in the past year prices in the turnaround; accumulate only below SGD 0.06 where the price approaches tangible book value.

PHASE 0: Opportunity Identification (Klarman)

Why Does This Stock Screen?

The Buffett screen flagged S3N with ROE of 15.8% and a market cap of SGD 423M. However, this ROE is misleading -- it reflects Chip Eng Seng Construction's profitability applied to the low equity base inherited from OKH Global's balance sheet restructuring. The 5% operating margin is more telling and characteristic of construction businesses.

Corporate History and Red Flags

1. OKH Global (2004-2025): Originally Sinobest Technology, renamed after an RTO in 2013. Developed industrial properties. Entered financial distress in 2015 during the industrial property downturn, requiring a rescue by Haiyi Holdings in 2016.
2. Divestment phase (2016-2024): New management spent eight years selling assets to reduce debt. Revenue shrank from SGD 10-11M (property rental) to essentially a shell with declining investment properties.
3. Reverse Merger (April 30, 2025): OKH Global acquired Chip Eng Seng Construction for SGD 118.5M, paid entirely in new shares at SGD 0.05252 per share. This tripled the share count from 1.13B to 3.39B shares.
4. Name Change (November 2025): Renamed to Global Resource Construction Ltd.
5. Financial Year Change: FY end changed from June 30 to December 31, creating an 18-month transitional period.

Assessment: This is fundamentally a newly created entity. Pre-acquisition financial history is irrelevant. The business is essentially Chip Eng Seng Construction wearing the OKH Global SGX listing as a shell. The corporate complexity adds governance risk.

PHASE 1: Risk Analysis (Inversion Thinking)

"All I want to know is where I'm going to die, so I'll never go there." -- Munger

1. Structural Low Margins (P=90%, Impact: Permanent)

Construction is one of the worst businesses in capitalism. GRC's gross margin in 1H2026 was 10.9% ($41.2M on $378.8M revenue), and net margin approximately 4.2%. These margins are characteristic of the industry and unlikely to improve structurally. A single bad project can wipe out a year's profit. The $12.2M provision for onerous contracts (primarily the LTA Contract) in FY2025 illustrates this perfectly -- one delinquent subcontractor triggered a $6.4M receivables impairment plus $3.6M in additional cost provisions. This is not a temporary risk; it is the permanent condition of the business.

2. Order Book Execution Risk (P=25%, Impact: -30%)

The $2.9B order book sounds impressive, but it represents years of work that must be executed profitably. Construction projects regularly experience cost overruns, delays, labor shortages, and disputes. The onerous contract provision already demonstrates this risk. If 5-10% of the order book turns unprofitable, it could consume multiple years of earnings. Expected Loss: 7.5%

3. Customer Concentration (P=20%, Impact: -35%)

In FY2025, three customers accounted for over 75% of construction revenue ($52.5M + $27.8M + $26.7M of $127.2M CES contribution). The business is heavily dependent on HDB public housing contracts, which are government-awarded and cyclical by political cycle. A slowdown in BTO launches would directly impact the order pipeline. Expected Loss: 7.0%

4. Corporate Governance / Reverse Merger Risk (P=15%, Impact: -50%)

The company has undergone multiple restructurings: Sinobest to OKH Global, rescue by Haiyi Holdings, reverse merger with CES Construction. Acrophyte Pte Ltd (formerly Chip Eng Seng Corporation) now controls >50% of shares. The accumulated losses of SGD 107.6M on the balance sheet are a visible scar of past mismanagement. The prospective approach to consolidation (not restating prior periods) makes financial analysis difficult. Expected Loss: 7.5%

5. Subcontractor/Supply Chain Risk (P=30%, Impact: -25%)

The FY2025 results explicitly disclosed a "Delinquent Subcontractor" under an LTA Contract who defaulted on obligations, requiring $6.4M in receivables impairment and $3.6M in onerous contract provisions. Construction companies are only as reliable as their subcontractor chains. Singapore's tight labor market and dependency on foreign workers add further risk. Expected Loss: 7.5%

6. Valuation Correction Risk (P=40%, Impact: -40%)

The stock has risen 331% in the past year from under SGD 0.03 to SGD 0.135. At 2.9x P/B, the market is pricing in sustained profitability and growth that is far from guaranteed for a construction company. If sentiment shifts or earnings disappoint, the stock could easily revert toward book value (SGD 0.043/share). Expected Loss: 16.0%

Bear Case (3 Sentences)

GRC is a low-margin construction business acquired through a reverse merger at an inflated share price, now trading at nearly 3x book value after a speculative 331% rally. The $2.9B order book creates the illusion of security, but one bad project quarter -- or a single major subcontractor default like the LTA Contract incident -- could consume an entire year's profit. If Singapore's construction boom moderates and the speculative premium evaporates, the stock could fall 50-70% toward its SGD 0.043 net asset value per share.

Sell Triggers

• Net profit margin falls below 2% for two consecutive half-years
• Order book declines below $1.5B without offsetting margin improvement
• Additional major subcontractor defaults or onerous contract provisions exceeding $20M
• Any related-party transactions that benefit the controlling shareholder at minority expense
• Change of CEO or key management departures

PHASE 2: Financial Analysis

Income Statement Analysis

FY2025 (Year ended June 30, 2025) -- IMPORTANT: Only includes 2 months of CES Construction

*FY2024 was pure property investment revenue with very high margins; not comparable

1H2026 (6 months ended December 31, 2025) -- Full period of CES Construction

*1H2025 was pre-acquisition OKH Global only

Annualized 1H2026 Run Rate:

• Revenue: ~SGD 757M
• Profit After Tax: ~SGD 31.8M
• Implied P/E: ~14.4x (at SGD 457M market cap)
• Net Margin: ~4.2%

Segment Analysis (FY2025, from acquisition date only)

Key observations:

• Building Construction is the core profit driver
• Civil Infrastructure has razor-thin margins
• Prefabrication Technology is loss-making
• Property Investment is high-margin but shrinking (assets being divested)
• "Others" segment carries corporate overhead losses

Balance Sheet Analysis (as at June 30, 2025)

Key observations:

• The company is in a net cash position post-acquisition (cash $102.4M vs borrowings $55.2M = net cash ~$47M)
• However, trade payables + contract liabilities + provisions + other liabilities total $298.7M -- this is the working capital nature of construction
• NAV per share DECREASED from 5.25 to 4.28 cents despite the equity injection because the reverse merger was highly dilutive (shares tripled)
• Accumulated losses of $107.6M ($48.5M inherited + $66.5M from CES consolidation) show this is NOT a business that has created value historically
• Goodwill of $11.0M from the acquisition adds intangible risk
• Provisions for onerous contracts ($14.6M) reflect real project losses

Cash Flow Analysis (FY2025)

The massive cash increase is almost entirely from the CES acquisition ($81.4M cash acquired). Operating cash flow of $21.5M is decent but reflects only 2 months of construction operations.

Quality Assessment (Buffett Test)

*The 15.8% ROE is calculated on a low equity base inflated by accumulated losses. On a normalized basis, this is a 4% net margin business requiring significant working capital. True economic returns are likely in the 8-12% range.

Valuation

Current Metrics:

*FY2025 EBITDA only includes 2 months of construction

Comparable Valuation: Singapore-listed construction companies typically trade at:

• P/E: 5-10x
• P/B: 0.5-1.5x
• EV/Revenue: 0.2-0.5x

GRC at 14.4x P/E and 2.9x P/B trades at a significant premium to construction peers. This premium is not justified by the quality of the business.

DCF / Owner Earnings Valuation:

Assumptions:

• Annualized owner earnings: SGD 30M (1H2026 run rate, adjusted)
• Growth rate: 5% (in line with construction sector growth)
• Discount rate: 12% (higher for construction risk)
• Terminal growth: 2%

Fair Value = $30M / (0.12 - 0.05) = ~$429M (optimistic) Conservative = $25M / (0.12 - 0.02) = ~$250M

Fair value per share:

• Optimistic: SGD 0.127
• Conservative: SGD 0.074
• Liquidation/NAV: SGD 0.043

Entry Prices:

• Strong Buy: SGD 0.045 (near NAV, ~12x pessimistic earnings)
• Accumulate: SGD 0.065 (25% margin of safety to conservative fair value)
• Current price (SGD 0.135): Overvalued by 8-83% depending on scenario

PHASE 3: Moat Assessment

Moat Sources

1. A1 Contractor Classification (Regulatory): GRC Construction holds A1 classifications for General Building (CW01) and Civil Engineering (CW02), allowing unlimited-value public sector tenders. This is a genuine barrier to entry -- achieving A1 requires demonstrated track record, financial capacity, and technical capabilities. However, several other Singapore contractors also hold A1 status (Lian Beng, Wee Hur, Tiong Seng, etc.), so this is a necessary condition for competing, not a unique advantage.

2. Track Record / Relationships (Reputation): Chip Eng Seng has been a main HDB contractor since 1982 -- over 40 years. This institutional knowledge and relationship with HDB creates some incumbency advantage in winning new contracts. However, HDB contracts are competitively tendered, so the lowest qualified bidder typically wins.

3. Prefabrication Capabilities (Vertical Integration): The company has precast/prefabrication operations, which provide some cost control advantage. However, this segment is currently loss-making, suggesting these capabilities are not yet generating economic value.

4. Scale (Cost): With a $2.9B order book, GRC is among the largest construction companies on the SGX. Scale provides some advantages in procurement, equipment utilization, and overhead absorption. But construction scale advantages are limited -- a large contractor doesn't have fundamentally different economics than a medium one.

Moat Width: NONE to NARROW

The honest assessment is that GRC has no durable competitive moat. Construction is a commoditized industry where projects are awarded primarily on price. The A1 classification is a necessary credential shared by multiple competitors. The HDB relationship provides slight incumbency benefit but not pricing power. Margins are thin and volatile, which is the clearest indicator that no moat exists -- a business with a genuine moat would be able to earn above-cost-of-capital returns consistently.

Moat Trajectory: Stable

The moat is neither widening nor narrowing. It is structurally determined by the nature of the construction industry and is unlikely to change.

PHASE 4: Management Assessment

Key Personnel

• CEO: Mr Lock Wai Han (Executive Director and CEO of OKH Global / GRC Limited since the turnaround phase)
• Controlling Shareholder: Acrophyte Pte Ltd (formerly Chip Eng Seng Corporation Ltd), holding >50% of enlarged share capital
• Non-Executive Chairman: Mrs Celine Tang (also Chairman of SingHaiyi Group)

Capital Allocation

• The FY2025 dividend of 0.13 cents per share represents ~$4.4M total or about 60% of FY2025 net profit. This is a reasonable payout for a construction company.
• No interim dividend declared for 1H2026, consistent with company practice.
• The reverse merger was funded entirely through share issuance, preserving cash -- pragmatic but dilutive.

Governance Concerns

• The company is incorporated in Bermuda (not Singapore), which provides less shareholder protection
• Multiple name changes and restructurings over the past decade suggest a shell-like corporate history
• The controlling shareholder (Acrophyte/Chip Eng Seng) could potentially benefit from related-party arrangements -- FY2025 disclosed rental income from a related company ($1.6M) and construction revenue from a related party ($0.1M)
• The pooling-of-interests method for the acquisition (prospective approach, no prior period restatement) makes it difficult to assess the true historical economics of the combined entity

Conclusion and Recommendation

WAIT -- Reject at Current Price, Revisit at SGD 0.06 or Below

Global Resource Construction is a genuine business with real revenues, a substantial order book, and a long track record in Singapore construction through the Chip Eng Seng legacy. The transformation from a struggling property shell to a major construction player is legitimate.

However, the investment case is deeply flawed at current prices:

1. Construction is a terrible business: 4% net margins, zero moat, project execution risk, subcontractor dependency. This is the opposite of what value investors seek.

2. The stock is expensive: At 2.9x P/B and ~14x trailing earnings, GRC trades at a massive premium to construction peers. The 331% price increase has already priced in the turnaround and then some.

3. The corporate structure is messy: Multiple restructurings, Bermuda incorporation, accumulated losses of $107M, and a reverse merger all add governance risk that is not compensated by the stock price.

4. No margin of safety: Even on optimistic assumptions, the stock is roughly fairly valued. On conservative assumptions, it is 50%+ overvalued.

The right approach is to put this on a watchlist and wait for the construction cycle to cool or the stock's speculative premium to fade. At SGD 0.045-0.065, GRC becomes interesting as a cheap exposure to Singapore's infrastructure boom with limited downside to book value. At SGD 0.135, the risk-reward is unfavorable.

Disclaimer: This analysis is for educational purposes only and does not constitute investment advice. The author has no position in S3N.