Koh Brothers third quarter profit up to S$13.1mn

Revenue climbs 35% to S$117.7mn while gross profit margin improves by 6.6 percentage points.

Koh Brothers Group Limited (“Koh Brothers”), a well-established construction, property development and specialist engineering solutions provider, today announced that its net profit attributable to equity owners of the company (“Net Profit”) for the three months ended September 30, 2011, (“Q3FY2011”) has more than tripled to S$13.1 million, compared to S$4.2 million in the previous corresponding quarter (“Q3FY2010”). Revenue for the quarter rose 35% to S$117.7 million.

The uplift in revenue was primarily generated by the Real Estate division due to revision of accounting treatment relating to INT FRS 115 – Agreements for the Construction of Real Estate, to recognise revenue and profit upon completion of construction (“COC”) of residential development projects for property units sold under the deferred payment scheme (“DPS”). Previously, units sold under DPS were accounted for using the percentage of completion (“POC”) method. Retrospectively, the change in accounting policy has been applied to 2010 comparatives.

In line with the revenue surge, gross profit margin improved 6.6 percentage points in Q3FY2011. Profit before income tax for the quarter climbed almost four times to S$16.1 million year on year.

For the nine months ended September 30, 2011 (“9MFY2011”), revenue increased 4% to S$274.3 million compared to a year ago. Correspondingly, the Group‟s gross profit rose 48% to S$39.6 million in 9MFY2011. The higher margin was contributed by the Construction and Building Materials and Real Estate divisions. During this period, the Group‟s net profit doubled to S$18.6 million.

Mr Francis Koh, Managing Director and Group CEO of Koh Brothers said, “With the change in accounting policy to recognise revenue and profit upon completion of residential projects under the DPS, our net profit has risen substantially. We are committed and promise to deliver quality developments on time, following our property launches in the last few years.

“We have a good track record of developing quality themed projects. Every project is unique and we take pride in going beyond limits to give home-owners the added touch through our themed homes. This is our competitive edge.

“Besides developing quality and themed residential properties, we also have a longstanding reputation in building and civil engineering works, particularly in drainage and soil improvement techniques. The recently launched Punggol Waterways is one such example.

“Our engineering team was met with two challenges in this project – turning the swampy clay into sturdy river banks, and protecting the MRT and LRT lines that ran close to the site. The team was eventually able to overcome these challenges using innovative techniques and we are proud to have contributed towards this vibrant waterside living project.”

As at September 30, 2011, the Group reported a rise in cash and cash equivalents to S$79.8 million, due to increase in the change in net cash generated from operating activities and decrease in the change in net cash used in financing activities. Earnings per share improved to 3.9 cents for 9MFY2011 from 1.9 cents in the previous corresponding period.

Outlook

The Ministry of Trade and Industry has revised its latest estimate growth rate for 2011 to 5% from its earlier 5% to 7%. It further added that growth for the rest of the year could be weighed down by the softening global economic conditions. Notwithstanding this, the Group expects the level of construction activity in Singapore to remain strong, especially for infrastructure and public building projects. Tender pricings are expected to remain competitive.
Koh Brothers expects the underlying property market condition to remain stable. This is in line with Urban Redevelopment Authority‟s latest estimate which indicates increase in private residential property prices continuing to moderate in the third quarter of 2011.

For the first half of 2011, visitor arrivals to Singapore grew by 15%, helping hotels improve occupancy and room rates. Against global economic uncertainties, the Group is cautiously optimistic that this trend will continue for the rest of the year.