Email This Print ThisChairman's Statement

Notwithstanding challenges in the construction industry and a downturn in the Singapore property cycle, we have continued to stay resilient through our strong construction track record, balance sheet and working relationship with strategic partners.

Dear Shareholders,

The last 12 months have been an exciting and busy one for us, as we continued to build a dynamic future set upon strong foundations for sustainable growth. It is my pleasure to present to you the annual report for the financial year ended March 31, 2016 ("FY2016").

We are pleased to report yet another strong set of results this year – our net profit is at a record S$61.5 million in FY2016, compared to S$41.7 million in the preceding financial year ("FY2015"), lifted by S$15.0 million contribution upon completion of our Liang Jing Ming Ju Phase 4 – Sequoia Mansion project in the PRC, as well as revenue recognised on percentage of completion of property development projects in Singapore.

Notwithstanding challenges in the construction industry and a downturn in the Singapore property cycle, we have continued to stay resilient through our strong construction track record, balance sheet and working relationship with strategic partners.

We recorded revenue of S$245.5 million in FY2016, a slight 0.3% dip from S$246.1 million in FY2015, in tandem with lower construction revenue that offset a 1.5% rise in rental income from investment properties.

Our balance sheet remains strong, with total borrowing and debt of S$139.6 million and fixed deposit, cash and bank balances of S$193.0 million, translating into a net cash position of S$53.4 million.

This sizeable war chest is especially crucial during challenging times like these, which not only keeps borrowing costs low through our high credit worthiness, it also allows us to have sufficient resources to selectively take on strategic construction projects to protect our healthy construction margins, and strike when the iron is hot as opportunities arise to capitalise on market cycles.


Construction remains our largest revenue driver – the segment reported revenue of S$239.2 million, or 97.4% of our total revenue in FY2016 compared to S$239.9 million in FY2015. Although revenue dipped slightly by 0.3%, profit for the segment rose 52.3% to S$26.6 million from S$17.5 million across the comparable periods.

Leveraging on our strong construction track record accumulated over 36 years, BCA A1 grade and strong balance sheet, we are able to selectively bid for projects that had allowed our construction gross margin to improve to 15.1% in FY2016 from 10.8% in FY2015 and segment net profit margin to grow to 11.9% from 7.3%. The improvement in margins are also due to the effectiveness of productivity measures implemented through adoption of technology and innovation.

As at March 31, 2016, our construction order book remains healthy at S$223.0 million lifted by a S$32.2 million contract from repeat customer, the National University of Singapore ("NUS"), to build a threestorey University Sports Centre Building to be completed by May 2017, and a S$34.8 million design and build public contract for the construction of a steel structure, electrical intake station and ancillary works.

While we expect construction costs to increase further, we are actively tendering for both public and private projects to capitalise on the sustained healthy construction demand in Singapore. The Singapore Building and Construction Authority retains an optimistic outlook and expects construction demand in 2016 to remain robust at between S$27 billion and S$34 billion, of which 65% will be derived from the public sector1.

As a result of our active tendering efforts to replenish our order book, we secured our fourth project win from NUS in May 2016 – a term contract for addition and alteration works within 24 months from May 16, 2016 to May 15, 2018, with the option to extend for an additional 12 months.

With the help of several government grants to boost productivity in the construction industry, we are also looking to redevelop and automate our factory and invest in new equipment and machinery to enhance our efficiency and competitiveness.

1 Public sector, civil engineering projects to drive construction demand this year: BCA – Business Times, January 16–17, 2016



Working closely with our JV partners and associates, our real estate businesses have continued to contribute strong returns to the Group's performance. In FY2016, our share of results of associates rose 82.8% due to revenue recognised on progress completion of our Singapore development projects and revenue recognised on completion of the Sequoia Mansion project that contributed S$15.0 million.


The Sequoia Mansion project has under 10% of units left unsold, due to a deliberate management decision to withhold units in view 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. We'll continue to monitor the market closely to maximise returns of our investments in the project.

We also look forward to the Phase One launch of our 22.5%–owned Gaobeidian township development project in Hebei province, a satellite city merely 19 minutes from Beijing by high speed train, earmarked by the government for development as part of its decentralisation strategy.

Construction for Phase One is expected to commence before end of June 2016, and complete within 24 months. Phase One consists a 40,000 square metre ("sqm") commercial belt, 1,600 mass–market residential units estimated to be priced at RMB4,000 to RMB5,000 per sqm and 1,450 high–end residential units estimated to be priced at RMB7,000 to RMB8,000 per sqm. The 3,050 residential units are targeted to launch before end–2016, subject to approval to be obtained from authorities.


In Singapore, latest 1Q2016 statistics showed an overall 0.7% decrease in prices of private residential properties, compared to a 0.5% decline in the preceding quarter, while number of units sold decreased 11.5%2. Prices of office space decreased 0.3% from a 0.1% decline in the previous quarter, while vacancy rate improved 0.3% percentage points to 9.2%, notwithstanding a 1.6% rise in pipeline supply.

Additionally, we have currently sold 91.1% of the 3,505 units launched across 14 projects as at March 31, 2016, translating to a balance of S$258.2 million in attributable share of progress billings to be progressively recognised. Most of our units were sold either at or above expected prices, demonstrating our ability to identify and execute choice projects that are well–received by the market, together with our valued partners.

2 Release of 1st Quarter 2016 real estate statistics – Urban Redevelopment Authority, April 22, 2016


In view of the lukewarm market in Singapore, we've set our sights overseas to diversify our geographical risks and property investment portfolio. During the year, we've jointlyacquired a freehold 42–unit hotel along Glenthorne Road in London, two minutes away from the Hammersmith underground station that we intend to redevelop into service apartments with about 85 rooms. We also acquired a prominent 2.45–acre site near the Leeds City Centre which has attained approval to build over 1 million square feet of mixed–use development.

Subsequent to the financial year end, we further expanded our overseas portfolio with the joint acquisitions of value–accretive assets in Manchester and Gloucester in the UK, and made our maiden entry into Japan, or more specifically, central Sapporo. These newly acquired assets are operating hospitality properties, managed by established international hotel operators including Accorand InterContinental Hotels Group, and will immediately strengthen our recurring income streams.


Despite a tepid property market, we are pleased that our investment in Prudential Tower, a Grade–A office building strategically located in Raffles Place, has achieved high occupancy and good tenant mix, and continues to contribute healthy revenue alongside our investment property in the PRC – Tianjin Tianxing Riverfront Square. Overall, rental income from investment properties increased 1.5% to S$6.3 million in FY2016 from S$6.2 million in FY2015.

Going forward, we'll continue to work closely with our JV partners to uncover attractive opportunities in Singapore – such as our successful High Park Residences project that had received overwhelming demand – and well–located properties abroad in markets with favourable cycles that will offer high yields.


To share the fruits of our labour with our faithful shareholders, we are pleased to propose a final and special dividend of 1.50 Singapore cents and 0.50 Singapore cent per share. Coupled with an interim and special cash dividend of 1.25 Singapore cents and 0.30 Singapore cent per share distributed earlier this year, the total dividend distributed in FY2016 is 3.55 Singapore cents per share, equivalent to a 6.5% yield, as at May 30, 2016.


I would like to take this opportunity to thank the management team for their dedication and for lending their deep experience to our businesses. I am also proud that we have a pool of long–serving and committed staff of engineers, quantity surveyors and site coordinators that supports our management team.

We are also very privileged to have a Board with such varied and complementing expertise, which has provided invaluable guidance to the Group. I would also like to thank our shareholders, customers, suppliers, partners and stakeholders for their support as we strive to bring the Group to its next phase of growth.

Choo Chee Onn

Executive Chairman and Managing Director
27 June 2016