Koh Brothers Eco show higher revenue and net profit 2Q/2018

SGX Catalist-listed sustainable engineering solution provider, Koh Brothers Eco Engineering Limited, reported revenue of S$6.2 million (US$4.55 million) for the three months ended 30 June 2018, as compared to the S$49.8 million (US$36.6 million) seen in the previous corresponding period in 2017.

The 33 per cent increase in total revenue can be mainly traced to the Engineering and Construction division. However, higher-than-expected costs resulted in a marginal decrease of three per cent in the gross profit to S$3.4 million (US$2.5 million) this quarter.

Net profit attributable to shareholders rose to S$1.9 million (US$1.4 million) from S$0.8 million (US$0.6 million) in the second quarter of 2017.

“Operating conditions remain challenging as the industry continues to face keen competition and rising construction materials costs. However, these challenges only heightened our resolve to capitalise on our strengths to seize opportunities to add to our order book and at the same time, stay careful in executing the projects to mitigate rising cost pressures,” Mr Francis Koh, chairman of Koh Brothers Eco, said. “As at 30 June 2018, the order book remained robust with a total outstanding value of S$872.2 million (US$640.47 million). Our synergistic civil-engineering and hydro-engineering capabilities have proven to sharpen our competitive edge in securing projects to add to our order book, which is currently underpinned by our share of three major projects – the Woodlands Health Campus, Deep Tunnel Sewerage System Phase 2 (DTSS Phase 2) and Circle Line 6 – worth close to S$600 million (US$440.6 million).”

Earnings per share this quarter came to S$0.09 (US$0.14) as compared to the S$0.10 (US$0.07) in 2017’s second quarter. Net asset value per share as at 30 June 2018 also increased to $0.06 (US$0.04) from the S$0.05 (US$0.03) seen as at 31 December 2017.

As of 30 June 2018, the balance sheet remains healthy, with cash and bank balances of S$18.9 million (US$13.8 million) and low net gearing of 0.20 time.


Outlook and future strategies

“With prospects in the construction sector expected to pick up over the near to medium term, we will continue to leverage on our synergistic competencies to pursue opportunities in the sector,” CEO of Koh Brothers Eco, Mr Paul Shin, stated. “However, it is crucial that our financial position remains strong to provide us with greater financial flexibility to secure opportunities to strengthen our order book further and sustain growth for the long term. Therefore, we hope that shareholders will lend their support for our growth plans via our recently proposed renounceable non-underwritten rights cum warrants issue.

On 29 June 2018, the Group proposed a renounceable non-underwritten rights cum warrants issue. Under this fund raising exercise, shareholders can subscribe for one rights share at S$0.045 (US$0.033 million) each, for every two existing shares held. Subsequently, with every one rights share subscribed, shareholders are entitled to a free warrant which carries the right to subscribe for one new ordinary share in the share capital of Koh Brothers Eco at an exercise price of S$0.05 (US$0.03) for each new share. The proposed rights cum warrants issue is subject to approvals by the relevant authorities.