Investor relations

Chairman's Statement

DEAR SHAREHOLDERS

With strong foresight and keen business acumen, Koh Brothers Eco Engineering Limited (“KBE” or the “Company” and together with its subsidiaries, the “Group”) acquired Koh Brothers Building & Civil Engineering Contractor (Pte.) Ltd. (“KBCE”) in July 2016. This strategic integration of interdependent businesses presents a necessary vertical integration of value chain that empowers the divisions to come together to maximize capabilities in the Construction and Civil Engineering business and Water & Wastewater Treatment business.

The encouraging results achieved in 2017 re-establishes the Group’s finesse in its forwardlooking execution of plans and prudence. On behalf of the Board of Directors of Koh Brothers Eco Engineering Limited, I am pleased to present you the annual report of the Company for the ƥ nancial year ended 31 December 2017 (“FY2017”).

FINANCIAL PERFORMANCE

The Group attained an impressive revenue of S$298.4 million which is 48% higher than the revenue of S$202.3 million achieved in the last financial year (“FY2016”). This resulted in a 15% higher net profit attributable to shareholders of S$7.0 million for FY2017.

The stronger performance was largely attributable to an increase in contribution from the Engineering and Construction Division which posted a revenue of S$277.0 million in FY2017. This was an increase from S$174.6 million in FY2016. The segment’s profit also rose to S$5.8 million in FY2017 from S$3.3 million in FY2016.

The stronger performance was largely attributable to an increase in contribution from the Engineering and Construction Division which posted a revenue of S$277.0 million in FY2017. This was an increase from S$174.6 million in FY2016. The segment’s profit also rose to S$5.8 million in FY2017 from S$3.3 million in FY2016.

The Group maintained a robust balance sheet with cash and bank balances of S$24.9 million and a net cash position as at 31 December 2017.

As at 31 December 2017, the Group’s net asset value per share rose to 5.94 Singapore cents from 5.27 Singapore cents as at 31 December 2016. The Group’s earnings per share was 0.80 Singapore cent in FY2017.

During the year under review, the Group undertook a rights cum warrants issue exercise to strengthen our capital base for business opportunities. We were encouraged by your strong support for the fund raising exercise, thus reflecting the strong confidence you have in the Group and the management’s ability to drive the Group to the next growth phase.

Standing strong as testament to the efficacy of our strategic actions, our order book stood at S$762.7 million as at 31 December 2017, supported by the recently awarded contracts including one relating to the PUB Deep Tunnel Sewerage System (“DTSS”) Phase 2 project secured by our 35%-owned joint venture with Penta-Ocean Construction Co., Ltd., POKB JV. In September 2017, the Group also won a contract relating to Circle Line 6, in which the Group will carry out all civil, structural, architectural, electrical & mechanical and system works relating to the construction of cut-and-cover tunnels and other structures from the east of the planned Prince Edward Station to the existing Marina Bay Station. Subsequent to the year end and alongside its partners, KBE had in March 2018 won a S$960.0 million landmark project from the Ministry of Health to construct the upcoming Woodlands Health Campus, a ƥ rst in the Woodlands vicinity.

FUTURE PROSPECTS

The local economy is undergoing restructuring and is projected by the government to mature at a long-term GDP growth of 1.5% to 3.5% for 2018. At the same time, PUB seeks to ensure a more resilient water supply by progressively increasing NEWater and desalination capacity to meet 85% of Singapore’s water needs by 2060. As such, PUB has plans for a sixth NEWater plant, which will further present us with more opportunities. Furthermore, having been involved in ƥ ve Active, Beautiful, Clean (ABC) Waters projects through KBCE, the upcoming 20 ABC Waters projects to be completed in the next ƥ ve years also presents exciting possibilities for the Group.

On the construction sector front, the Building and Construction Authority (“BCA”) projects demand to reach between S$26 billion and S$31 billion in 2018, with 60% of the projects to be derived from the public sector with projects such as North South Corridor and remaining packages for Runway 3 of Changi Airport. Additionally, BCA has also projected a steady demand for construction in the following years to come, owing to major infrastructure projects in plan. These include Changi Airport Terminal 5, Cross Island Line, and Jurong Regional Line.

As KBCE is accredited with BCA Class A1 grading for Construction and Civil Engineering, the Group is able to tender for projects of unlimited value. The anticipated projects will hence set up favorable circumstances for the Group to further pursue more projects of higher value.

GROWTH STRATEGY

Even as we enjoy success, it is essential for us to remain steadfast and adaptive to further capitalise on our synergies to stay competitive in order to secure opportunities and drive growth amid the continued challenging operating environment.

At the core of it all, the Group will continue to angle on, and unite, the scope of KBE with KBCE’s expertise, track record and longstanding experience in construction, civil engineering and drainage works. As we approach the two-year mark in forming this strategic alliance, KBCE has already contributed greatly to the Engineering and Construction business division of KBE; it will continue to valueadd to the professional services that KBE has to offer as we acquire more projects and opportunities to demonstrate our aptitude. The amalgamation has given us a robust and acquiescent base to oƤ er an extremely competitive and compelling value proposition to our clients, based on their respective needs, regardless of what they may be. Much like water making its way through cracks, as we adjust to obstacles and the economic weather, we will surely be able to find a way around or through them.

The Group’s majority-owned subsidiary, Oiltek Sdn. Bhd. (“Oiltek”), remains optimistic about the long term prospects of the commodities industry. Moving forward, Oiltek will bide its time as it continues to develop new and innovative proprietary technology in the oil reƥ ning process so as to augment its competitive edge and to propel its businesses at an opportune time.

PROPOSED DIVIDENDS

It has been a successful year for us. I am therefore pleased to announce that the Group has proposed to increase the final cash dividend for FY2017 to 0.10 Singapore cent per share. This is an increase from 0.06 Singapore cent per share in the previous year, and is payable on 6 June 2018 after approval by shareholders at the forthcoming Annual General Meeting.

CONCLUSION & APPRECIATION

I would like to take this opportunity to express my heartfelt appreciation to the staff and management team, whose dedication and hard work have continually propel the company forward. To our clients, business associates and shareholders, a big thank-you for your unwavering support and confidence as we continue to strive for greater success!

Koh Keng Siang (Francis) Non-Executive Chairman
28 March 2018