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Our strong balance sheet will offer us financial flexibility to capitalise on opportunities as they arise, and puts us in good stead to selectively take on strategic construction projects to protect our healthy construction margins

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, 2017 ("FY2017").

It has been an eventful past 12 months for us as we continued to build upon our solid fundamentals to ensure sustained long-term growth for resilience during these volatile times.

Amidst the increasingly challenging operating environment, we are heartened that KSH has continued to record a set of resilient results for the year. We achieved revenue of S$199.3 million and net profit attributable to owners of the company of S$41.0 million in FY2017.

While topline was an 18.8% decline from S$245.5 million a year ago ("FY2016") due to lower contributions from the construction segment, our strategy for prudent selection has paid off, as reflected in our higher construction gross profit margin of 21.6% achieved in FY2017, as compared to 15.1% in FY2016.

Despite the lower revenue, our efforts to raise productivity and efficiency is evident in our overall decline in expenses that has allowed our profits from operations to grow 78.7% to S$32.7 million in FY2017.

The lower net profit of S$41.0 million in FY2017 as compared to S$61.5 million in FY2016 was mainly due to lower share of results of associated companies of S$8.5 million, with an absence of S$12.2 million profit recognised last year on completion of Sequoia Mansion, S$3.9 million preliminary costs incurred on the Gaobeidian project in the PRC, and a one-off S$3.6 million provision on impairment loss on unsold properties for accounting prudence.

Total borrowing and debt was reduced to S$66.7 million, while fixed deposit, cash and bank balances was S$145.9 million, translating into a net cash position of S$79.2 million.

Our strong balance sheet will offer us financial flexibility to capitalise on opportunities as they arise, and puts us in good stead to selectively take on strategic construction projects to protect our healthy construction margins.


Construction remains our largest revenue driver, constituting 97.2% of our total FY2017 Group revenue at S$199.3 million. Our order book stood at a healthy level of more than S$340.0 million, as at March 31, 2017.

Our established track record of both public and private projects, and close relationships with strategic customers, have allowed us to clinch several new contracts this year, including two contracts from National University of Singapore ("NUS") – a 24-month term contract (with option to extend for a further 12 months) and a S$145.7 million contract to erect a research building comprising 16 floors and a basement – and a S$139.1 million construction contract to build three blocks of residential towers, inclusive of basements.

Expecting costs to escalate further, with the help of government grants, we are actively sending our workers for skills upgrading and training, and adopting greater use of technology and building methods to reduce reliance on manpower, increase productivity and efficiency. We are also looking to redevelop and automate our factory and invest in new equipment and machinery to enhance our efficiency and competitiveness.

The Singapore Building and Construction Authority retains an optimistic outlook and expects construction demand in 2017 to remain robust at between S$28 billion and S$35 billion, of which 70% will be derived from the public sector1 . Apart from pursuing projects in the private space, there are also several large-scale public projects in the pipeline, which presents good opportunity for us to replenish our order book.


During the year, we continued to work closely with our JV partners and associates to execute our ongoing projects, while keeping a look out for yield-accretive opportunities, both locally and overseas.

As at March 31, 2017, we have launched 15 projects and sold approximately 95.8% of all launched units, translating into S$163.2 million of attributable share of progress billings to be progressively recognised.


On Singapore's real estate outlook, latest statistics from the Urban Redevelopment Authority ("URA") suggests healthy demand from the market, with 1,555 private homes being sold in April 2017, double that of the 750 units sold in April 20162. The URA's 1Q 2017 real estate statistics also showed a gentler 0.4% decline in private residential property prices, compared to the 0.5% dip in 4Q 20163, signalling stabilising prices.

During the year, we've soft-launched our 30%-owned 121 Collection on Whitley, which consists 8 semi-detached houses and a bungalow – all of which are freehold properties. Located in the prime District 11, 121 Collection on Whitley offers a pillar-less ground floor and an expansive glass facade. The exclusive residential neighbourhood is at the doorstep of the upcoming Mount Pleasant MRT station, Orchard Road, Dempsey Hill and a myriad of amenities.

We've also replenished our land bank in Singapore with the acquisition of a 49%-owned property in Geylang that spans 1,115 square metres, which we plan to develop into a block of 8-storey residential flats with roof terrace and swimming pool. The project is targeted to be launched in 2017.


Our 22.5%-owned Gaobeidian township project has received considerable interest recently 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 40 km away from Xiongxian, one of the cities of the NSEZ.

The Gaobeidian project, a satellite city merely 19 minutes from Beijing by high speed train, sits on a sprawling land size of about 5.3 million square metres (8,000 mu) and approximately 3,000 mu has been approved by the PRC authorities for development. The consortium is pending relevant approvals for the launch of 3,008 residential units for sale in the second half of 2017, as part of the 5,540 residential units and 27,500 square metres of commercial space approved for Phase 1. We'll continue to monitor the market closely and launch the units for sale at an opportune time to ride on the favourable market cycle.

On our Sequoia Mansion project, we've recognised the bulk of the earnings, approximately 10% of units remain unsold due to a deliberate decision to withhold the sale in anticipation of an expected rise in property prices stemming from the Beijing City government's anticipated relocation of some administrative functions to Tongzhou and the impending launch of a Universal Studios theme park in 2019.


In FY2017, we've expanded our footprint in the United Kingdom (“UK”) with a 30% acquisition of the Holiday Inn Express Manchester City Centre hotel in Manchester – our fifth joint acquisition in the UK with our partners. The 12-storey hotel has 147 bedrooms and convenient access to Greater Manchester and the UK via the nearby railway and train stations. Managed by the world-leading hotel operator, InterContinental Hotels Group, the hotel is well positioned to attract both leisure and business travellers, and has since started contributing positive recurring income to the Group.

Following our acquisition of a prominent site in Leeds last February, the first phase of the consortium's proposed masterplan was approved in August 2016, which will see the refurbishment and extension of an existing office building into a 192-room hotel. Subsequent to the year end, Hilton was appointed in April 2017 to manage the hotel under its luxury brand, Hampton by Hilton, which is expected to launch in late-2019.

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 is expected to contribute positive recurring income to KSH going forward.


We have made our maiden entry into the Japanese market during the financial year, acquiring a 10% stake to purchase a 15-storey, 164-room hotel and a 14-storey building with 66 residential and 4 retail units in central Sapporo. Located within walking distance to subway stations and just two steps from the main transit hub of Sapporo Station, all hotel, retail and residential units will be leased to generate recurring income.


Despite concerns of looming pipeline office supply, we are pleased to report that an aggregate of 17 strata units in Prudential Tower have been sold and completed in FY2017, with remaining units leased expected to continue to contribute healthy recurring income.

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


We are committed to rewarding shareholders, in appreciation of your support over the years. Hence, we've proposed final and special cash dividends of 1.5 SGD cents and 0.5 SGD cent per share, respectively. Coupled with the interim dividend of 1.25 SGD cents, this brings the total dividends declared in FY2017 to 3.25 cents per share.

Additionally, we have also proposed to issue one bonus share for every four existing shares. This will be subject to shareholders and regulatory approvals required.


KSH's resilience 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 co-ordinators, 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 network. Not forgetting our shareholders, customers, suppliers, sub-contractors, partners and stakeholders, thank you for your confidence in us as we strive to bring the Group to the next level.

1 Building and Construction Authority – Public sector construction demand is expected to increase this year, January 6, 2017
2 Business Times, May 16, 2017 – April new home sales more than double year-ago showing: URA
3 Urban Redevelopment Authority, January 26, 2017 – Release of 4th Quarter 2016 real estate statistics

Choo Chee Onn

Executive Chairman and Managing Director
30 June 2017