Email This Print ThisChairman's Statement

It has been a busy year for us as we continued to maintain a long-term view on the business, ensuring sustainable growth going forward. We had replenished our Singapore land bank during the year, just in time for the residential sector's turnaround, and strengthened our construction order book through the award of new projects.

Dear Shareholders,

On behalf of the Board of Directors, I am pleased to present to you our annual report for the financial year ended March 31, 2018 ("FY2018").

It has been a busy year for us as we continued to maintain a long-term view on the business, ensuring sustainable growth going forward. We had replenished our Singapore land bank during the year, just in time for the residential sector's turnaround, and strengthened our construction order book through the award of new projects.

While we are in the process of seeding the ground, we are pleased to report a set of resilient results for the year, achieving a net profit of S$29.5 million on S$132.6 million revenue for FY2018.

FY2018's revenue was a 33.4% decrease compared to S$199.3 million a year ago ("FY2017"), mainly due to lower construction revenue resulting from delays in handover of two construction sites.

Notwithstanding the lower construction revenue, construction margins rose to 23.8% in FY2018 compared to 21.6% in FY2017.

We also recorded a 92.6% growth in share of results of joint ventures lifted by profit recognised on construction progress of a residential project that has been fully sold, although share of results of associates recorded a loss of S$3.1 million compared to a profit of S$8.5 million in FY2017 due to lower sales and percentage-of-completion revenue recognised on Singapore development projects, and loss recognised from the sales of development properties developed by an associated company in Singapore.

Overall, we recorded a 28.1% decrease in net profit attributable to owners this financial year compared to the S$41.0 million reported in FY2017.

Meanwhile, our balance sheet and working capital position remain healthy with fixed deposits, cash and bank balances of S$76.2 million as at March 31, 2018. This will serve to offer us financial flexibility to capitalise on opportunities as they arise.


Construction remains our largest revenue driver, constituting 95.4% of our total FY2018 Group revenue at S$126.6 million.

Our order book as at March 31, 2018 remains healthy at S$542.0 million, lifted by a letter of intent for a S$266.3 million contract awarded during the year for the construction of Riverfront Residences, a residential project developed by a 35%-owned associated company of the Group. Concurrently, our other ongoing construction projects are progressing well on schedule.

With expectations for operating costs to rise further, we are proactively employing innovation and technology in our construction business to optimise margins, enhance productivity and to remain competitive in this challenging environment.

With our strong track record in both public and private projects, balance sheet, and A1 grade, we are optimistic that we will be able to capture the positive outlook projected by the Singapore Building and Construction Authority ("BCA"), which expects the total value of construction contracts to be awarded this year to reach between S$26.0 billion and S$31.0 billion1.

BCA also expects the public sector to constitute 60% of the forecast to reach between S$16.0 billion to S$19.0 billion, while the private sector is expected to be boosted by a steady pipeline of residential and commercial projects.



It has been an eventful year for our property development segment in FY2018, having replenished our Singapore land bank with four sites via both the primary and secondary markets at very reasonable prices, ahead of the en bloc fever that had driven land prices to record highs.

These four sites include the collective purchase of Serangoon Ville in Serangoon North (Affinity At Serangoon); former HUDC in Hougang, Rio Casa (Riverfront Residences); a successful GLS tender at Woodleigh Lane (Park Colonial), adjacent to the up-and-coming Bidadari estate; and the collective purchase of freehold properties at Lorong 24 Geylang.

Cognisant of a significant upcoming residential pipeline, our JV partners and ourselves understand that speed is of the essence and are racing against time to launch all four sites in 2018, that will total approximately 3,439 residential units.

Meanwhile, our launched projects continue to progress well, selling at prices at or above expectations. As at March 31, 2018, we have officially launched 16 projects and sold approximately 96.5% of all launched units, translating into S$85.9 million of attributable share of progress billings to be progressively recognised.

Latest statistics from the Urban Redevelopment Authority ("URA") bodes well for our upcoming property launches and ongoing sales of launched projects. The Singapore real estate sector recorded the steepest quarter-on-quarter gain since 2Q 2010 in 1Q 2018 when private residential prices rose 3.9% compared to a 0.8% growth in 4Q 2017.

During the quarter, developers launched 921 units for sale in 1Q 2018 compared to 877 units in 4Q 2017 and sold 1,581 units compared to 1,864 in the same corresponding periods2.

Likewise, prices of office space increased 1.3% in 1Q 2018, continuing the 2.7% growth in 4Q 2017, while rentals rose 2.6%, consistent with that of the preceding quarter.

Our investment in Grade A office building, Prudential Tower that is located in the heart of Singapore's CBD, continues to contribute healthy recurring earnings to the Group as the consortium seeks to push sales of the strata units at the right prices.

Going forward, we'll continue to work closely with our partners to seek well-located sites for development while focusing on the execution of our projects to be launched in 2018, as well as to explore yield-accretive investment opportunities to bolster our recurring income stream.


Our 22.5%-owned Gaobeidian township project in the PRC has received considerable interest arising from an announcement in April 2017 by the PRC Government on the establishment of the Xiongan New Special Economic Zone ("NSEZ") that has sent property prices soaring in neighbouring cities of the NSEZ, such as that of Gaobeidian that is about 40km away from Xiongxian, one of the cities of the NSEZ.

The consortium is working closely with local authorities and monitoring the market closely for the Gaobeidian township project. We target to launch over 3,000 residential units for sale from September/October 2018. We plan to launch the remaining residential units and commercial space at an appropriate time depending on prevailing market conditions, subject to obtaining the necessary approvals required from the relevant authorities.

Meanwhile, our investment property in the PRC, Tianjin Tianxing Riverfront Square, continues to enjoy resilient occupancy and contribute positively to the Group.

Our projects in the United Kingdom ("UK") have been progressing well – our 15%-owned township project in Leeds have commenced work on the first phase of the regeneration scheme in September 2017 that will create a sustainable destination on a 2.45-acre site nearby the city centre. The consortium have also appointed international hotel chain operator Hilton to operate a 192-bedroom hotel within the mixed-development to be operated under the upscale Hampton by Hilton brand.

During the year, we also acquired a 25% stake in Dry Bar, an iconic four-storey terraced building with one basement level that played an important role in Manchester's 20th century music history for three decades. With a gross internal floor area of about 20,713 square feet, the consortium intends to redevelop Dry Bar into a stylish new hotel within one of the city's most vibrant districts.

In London, our 10%-owned Luma Concept Hotel has commenced operations in April 2017. Within close proximity to the Hammersmith train station and many places of interests, the 89-room concept hotel has recorded healthy occupancy since its opening.

Concurrently, our other operating hospitality assets in the UK – 86-room Ibis Budget Bradford (15%-owned), 127-room Ibis Hotel Gloucester (15%-owned), 147-room Holiday Inn Express Manchester City Centre (30%-owned) – and 10%-owned 164-room hotel in Sapporo, Japan, continue to contribute positive recurring income to the Group.

In FY2018, we've also successfully sold our 20%-owned freehold St Kilda residential property in Melbourne, Australia, for A$34 million. Our share of the profit from the sale had contributed to the results of FY2018. We'll continue to keep a look out for opportunities to recycle capital into other yieldaccretive investments in Singapore and abroad.


In appreciation of your support over the years, we have proposed a final cash dividend of 1.2 SGD cents per share. Coupled with the interim cash dividend of 1.00 SGD cent per share distributed earlier in the financial year, this brings the total dividends declared for FY2018 to 2.20 SGD cents per share, or a payout ratio of 42.6%.


KSH's resilient performance and solid fundamentals would not have been possible without the hard work of the management team, and our pool of long-serving and committed staff of engineers, quantity surveyors and site coordinators, whom I'd like to extend my heartfelt appreciation for their dedication and for lending their deep knowledge and experience to the Group.

Our Board of Directors have also provided invaluable guidance and opened many doors for us with their varied expertise and networks. Not forgetting our shareholders, customers, suppliers, sub-contractors, partners and stakeholders, thank you for your confidence in us as we continue to charge forward in the coming year.

1 Building and Construction Authority, 11 January 2018 Public sector construction demand is expected to strengthen this year
2 Urban Redevelopment Authority, 26 April 2018 Release of 1st Quarter 2018 real estate statistics

Choo Chee Onn

Executive Chairman and Managing Director
29 June 2018