KOON: New CEO turns 1H08 loss to S$4.7 million net profits for 1H09

We are highly adaptable to change, says CEO Tan Thiam Hee. Photo by Sim Kih

FOR THE construction sector with its relatively thin margins, having a finance person at the helm appears to be a good thing.

Koon Holdings, a leading local reclamation and shore protection civil engineering specialist, turned its earnings around within a year after its new CEO, Mr Tan Thiam Hee, joined the company in July 2008.

Mr Tan, who was ASL Marine’s former financial controller, streamlined and rationalized operations, delegated responsibilities, trimmed headcount, redeployed staff, and put in checks and balances in managing subcontractors and suppliers.

From a net loss of S$3.5 million in 1H08, the construction company made net profits of S$4.7 million in 1H09.

Assuming the second half brings in the same earnings, its PE is around 2.5X based on a stock price of 31 cents.

An interim one-cent dividend was declared in the results announcment which was made during the lunch break yesterday. At the end of the day, the stock closed at 31 cents, up 3 cents, for an annualized dividend yield of 6.5%.

Cash reserves had improved 47.8% to S$16.4 million from a year ago.

Gross margins were 10.4% while net margins were 6.7%.

Revenues grew 27.4% year-on-year to S$70.1 million, mainly boosted by larger contribution from its construction segment.

Construction contributed 92.8% to revenues while marine logistics contributed 6.6%. The company also has a small division for the rental of civil engineering equipment and industrial vehicles.

Koon's S$118 m project at Serangoon Reservoir.

1H09 revenues were boosted by recognition of work on the Punggol-Serangoon Reservoir (for PUB), Gardens by the Bay (for National Parks Board) as well as roads and bridges at the Construction Industries Park (for BCA).

Singapore’s tiff with Malaysia over water imports led to the governmental decision to turn all water bodies on our main island into freshwater catchment reservoirs by damming river mouths.

The first of these projects is the iconic Marina Barrage at the Marina Bay area. This is Singapore’s 15th reservoir, and boosts our water catchment area from half to two-thirds of our national land area.

The S$118 million Punggol-Serangoon Reservoir, which Koon is building, is the third. Its order book was S$119 million as at 30 Jun 2009, for projects lasting into 2010.

”We only construct public projects,” said Mr Tan during a telephone interview with NextInsight yesterday after its results were released.

Construction demand in 2009 for public civil engineering projects will range from S$9 billion to S$10.2 billion, according to estimates by the Building and Construction Authority (BCA).

Aided by the influx of public sector construction projects, the group secured 3 projects worth about S$63 million (A$59.6 million) this year.

Among these were the road, drain, sewer and soil improvement works on Jurong Island and construction works for the wetlands at Lorong Halus Landfill.

Koon has been involved in almost all the land reclamation projects in Singapore, and is likely to secure more orders in upcoming mega projects like the International Cruise Terminal at Marina South.

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