LETTER TO SHAREHOLDERS
Extracted from Annual Report 2023
Dear Shareholders,
The Singapore economy registered slower growth of 1.1% in 2023 (versus 3.8% expansion in 2022), influenced by significant headwinds in the global economy amidst ongoing geopolitical tensions, inflationary pressures and an elevated interest rate environment. Despite the macroeconomic challenges, the domestic construction sector remained resilient by expanding 5.2%, compared to growth of 4.6% in the previous year, mainly supported by the increase in activities in both the public and private sectors.
The Singapore property market continued to moderate as statistics released by the Urban Redevelopment Authority revealed that private home prices in Singapore rose by 6.8% in 2023, slowing from the 8.6% increase in the previous year. This was mainly due to cautious buying sentiment arising from concerns about the challenging economy, additional property cooling measures and high interest rates. Meanwhile, the Jurong Town Corporation market report for the fourth quarter of 2023 indicated that demand for industrial space remained strong with prices and rentals rising alongside stable occupancy rates.
FINANCIAL HIGHLIGHTS
The Group recorded revenue of S$202.0 million in the financial year ended 31 December 2023 (“FY2023”) compared to S$142.7 million in the previous year. The higher revenue was mainly due to the progress in construction of the Aviation Park and Serangoon North MRT stations as well as the sale of industrial building units at Shine@TuasSouth in FY2023. Our Civil Engineering segment posted revenue of S$169.4 million in FY2023 compared to S$138.7 million in the financial year ended 31 December 2022 (“FY2022”). Our Property Development segment booked sales of S$32.4 million in the year under review compared to revenue of S$3.8 million in FY2022.
Gross profit increased by S$12.8 million from S$10.4 million in the previous year to S$23.2 million in FY2023 mainly due to higher revenue and gross margin improvement from the Property Development segment. Other income increased by S$3.5 million from S$11.5 million in FY2022 to S$15.0 million in the year under review because of higher interest income of S$2.3 million, legal cost award of S$1.1 million and higher rental income contributions from the leased industrial units at Shine@TuasSouth.
The Group recorded loss of S$0.4 million from our share of results of joint ventures in FY2023 compared to S$3.1 million in FY2022, mainly due to the Mattar Road residential project obtaining TOP status in December 2022, with the majority of sales being booked in the previous years. Net profit increased by S$10.2 million from S$16.4 million in the previous year to S$26.6 million in FY2023, mainly due to higher sales, gross profit and other income which was partially offset by the share of loss of joint venture and higher administrative costs. Earnings per share has increased from 3.2 cents to 5.2 cents, an improvement of 61%.
As of 31 December 2023, the Group’s net assets stood at S$259.1 million (50.6 cents per share) with cash and cash equivalents of S$132.5 million as compared to S$237.2 million (46.3 cents per share) and S$108.8 million respectively in the previous year.
DIVIDENDS
To reward our loyal shareholders for their continuous support, the Board would like to propose a first and final cash dividend of 1.5 Singapore cent per share, subject to shareholders’ approval at our upcoming Annual General Meeting (“AGM”) scheduled on 24 April 2024.
FY2023 BUSINESS UPDATE
The Group achieved a significant milestone in its Changi Airport joint venture project with the substantial completion of Phase 2 at the end of the year under review. Notwithstanding the rising business costs, we have been proactively managing our civil engineering contracts such as the Aviation Park and Serangoon North station projects, to enhance operational efficiencies while driving project execution.
In addition, the Group continues to benefit from the development of the industrial real estate in the vicinity of the Tuas mega port. We sold an additional 40 units at our multi-user industrial development at Shine@TuasSouth in 2023. To date, the Group has sold 34% and leased 63% of the total units at the industrial building.
BUSINESS PROSPECTS
According to the Building and Construction Authority, overall construction demand is expected to range between S$32 billion and S$38 billion in 2024. The public sector is expected to contribute about 55% of total projected demand, underpinned by public housing and infrastructure projects. Over the medium-term, total construction demand is expected to reach between S$31 billion and S$38 billion annually from 2025 to 2028. In addition to public housing developments, the public sector construction pipeline is expected to be supported by various major infrastructure projects such as the MRT projects for the Cross Island MRT Line (Phase 3) and the Downtown Line Extension to Sungei Kadut as well as the construction of integrated developments and redevelopment of Alexandra Hospital and several junior colleges.
The Group will continue to leverage on our strong track record and industry expertise to secure more contracts in the public civil engineering and construction sectors in Singapore to bolster our order book.
The existing order book for the Civil Engineering segment stands at about S$708 million as at 31 December 2023. This mainly comprises the contracts for the Aviation Park and Serangoon North station projects while the Changi Airport joint venture project is expected to be completed within the first half of 2024. While the Group continues to contend with rising cost pressures and acute manpower constraints in a highly competitive business environment, we remain focused on disciplined execution and operational excellence to overcome these challenges.
We are encouraged by the keen interest in our industrial units and will continue to actively market the sale of the remaining units at Shine@Tuas South.
The Group expects the outlook for the private residential market to remain challenging with volatile macroeconomic environment weighing on buyer’s sentiment amidst both higher cost of living and borrowing cost.
Looking ahead, Singapore’s external demand outlook is expected to be supported by the anticipated turnaround in global electronics demand. Nevertheless, recent downsizing at major technology companies signals the need to manage operating costs ahead of stronger headwinds. Recoveries, in major economies and industries, will be uneven. Geopolitical tensions between major global powers, mid-term presidential election in North America and differences in stances on monetary and fiscal policies taken by major central banks to manage inflation are likely to cause volatility in financial and commodities markets affecting growth and recoveries. Against this backdrop, the Ministry of Trade and Industry has maintained Singapore’s economic growth forecast at 1.0% to 3.0% in 2024. Management will continue to adopt a cautious stance towards evaluating opportunities in civil engineering and property development projects.
ACKNOWLEDGEMENT AND APPRECIATION
The Board would like to thank Dr Ong Seh Hong for his strong leadership and invaluable contributions as chairman of the Board for over a decade, before he steps down after the upcoming AGM. Dr Ong was instrumental in helping the Company remain resilient amidst challenging conditions, while laying the foundation for its future growth.
We are pleased to welcome our new independent director, Mr David Tan, who joined our Board on 2 January 2024. Mr David Tan brings with him a wealth of experience with over 20 years of senior management experience in the banking and finance industry.
Finally, we would like to take this opportunity to thank our fellow Board members for their wise counsel in the last financial year. We are also grateful to our management team and colleagues for their dedication and tremendous efforts during the year.
While the global economic outlook remains uncertain, we look forward to the opportunities that lie ahead. The Group will continue to build on the foundation of its strong balance sheet and prudent cash flow management to evaluate suitable investment opportunities and deliver sustainable growth to its shareholders.
Ong Seh Hong
Independent Non-Executive Chairman
Chua Leong Hai
Executive Director and CEO