KEONG HONG HOLDINGS LIMITED ANNUAL REPORT 2023 BUILDING RESILIENCE FOR THE FUTURE
CONTENTS 04 Chairman’s Message 10 Financial Highlights 12 Financial and Operations Review 18 Board of Directors 22 Key Management 23 Corporate Information 24 Corporate Governance Report 52 Directors’ Statement 58 Independent Auditors’ Report 63 Financial Statements 151 Analysis of Shareholdings 153 Notice of Annual General Meeting 157 Additional Information on Directors Seeking Re-election Proxy Form
INCREASE BUSINESS RESILIENCE AND FUTURE READINESS AS WE ADVANCE FORWARD
DEAR SHAREHOLDERS, In the past year, we have faced a very challenging environment despite the overall economic conditions remaining fairly stable. Singapore’s economy grew by a modest 1.1% in 2023, decreasing from the 3.8% growth in 2022. The construction sector, however, was one of the best performing sectors, registering a 5.2% expansion in 2023, stronger than the 4.6% growth in 2022.1 Despite this seemingly positive state of the economy, inflationary pressures persisted, weighing down profits. Rising interest rates made the cost of borrowing more expensive, in turn impacting consumer demand. Furthermore, the economic uncertainty caused by geo-political tensions has dampened sentiment. Despite the very unfavourable operating environment, Keong Hong succeeded in narrowing its gross loss, managing costs and improving its operations. We have rationalised some of our assets to utilise and recycle our cash more efficiently and to place us in a stronger position to face the ongoing challenges ahead and for future investment opportunities. FINANCIAL HIGHLIGHTS We closed our financial year ended 30 September 2023 (“FY2023”) with revenue of $176 million, a 18.9% increase as compared with revenue of $148.1 million in the financial year ended 30 September 2022 (“FY2022”). We recorded a negative gross margin of 11.3% following on the gross loss of $19.9 million as compared to negative gross profit margin of 20.8% and gross loss of $30.8 million in FY2022. The Group’s other income of $16.9 million was an increase of 80.6% over the $9.4 million other income in FY2022. This was mainly on account of the one-off gain from the disposal of two investment properties in Osaka, Japan. The Group also recorded a net loss of $4.8 million from its share of results of joint ventures, and the Group’s share of net losses of associates increased to $7.8 million in FY2023 as compared to $5.5 million in FY2022. Consequently, the Group sustained a net loss after tax of $50.8 million as compared to a net loss after tax of $46.6 million in FY2022. On the Group’s financial position, our cash and cash equivalents were $12.7 million ($22.6 million in FY2022), with the Group registering a deficit in operating cash flow before working capital changes of $31.3 million. Net asset value per share stood at 27.4 cents as at 30 September 2023. The Board is not proposing any dividends for the financial year FY2023 considering the Group’s financial performance, working capital requirements and need for future funds for possible investment and growth opportunities. The Group remains committed to ensuring its financial viability especially given the uncertain economic outlook in the immediate future. BUILDING CONSTRUCTION – OPTIMISTIC AMIDST CHALLENGES Despite the robust construction sector which has contributed to Singapore’s economic growth, increased costs associated with higher fuel and water expenses as well as manpower constraints remained. We have performed commendably given these challenges. 1 Ministry of Trade and Industry, “MTI Maintains 2024 GDP Growth Forecast at “1.0 to 3.0 Per Cent”, 15 February 2024. KEONG HONG HOLDINGS LIMITED CHAIRMAN’S MESSAGE 04
2 Building and Construction Authority, “Steady Demand for the Construction Sector Projected for 2024”, 15 January 2024. 3 Urban Redevelopment Authority, “Release of 4th Quarter 2023 real estate statistics”, 26 January 2024. We are pleased to report that our projects have progressed smoothly. Both Wilshire Residences and Sky Everton have obtained their Temporary Occupation Permit (“TOP”) in August 2023. In March 2023, we were awarded our first mixed-use commercial construction project in the Central Business District, Solitaire on Cecil worth $118 million. The project involves the erection of a 20-storey office building comprising restaurants on the first storey with two basement carparks on Cecil Street. The construction commenced in May 2023. Our newest residential construction project, Sky Eden @ Bedok, is on track for completion in 2025. This latest project enhances our portfolio of mixed commercial and residential developments. With respect to our public sector projects, the new National Skin Centre at Mandalay Road was officially opened on 25 October 2023. The Punggol Regional Sports Centre, and the additions and alterations work to the Grand Hyatt Hotel Singapore have made good headway after initial delays postCOVID 19 which had set back the completion by several months. We were also awarded the Tengah Plantation Contract 5 main contract work by the Housing and Development Board amounting to $293.7 million, which places us in a strong position as we head into 2024 and adds to our order book currently valued at approximately $658 million. With our latest portfolio of projects, the split between residential projects and commercial projects is approximately 55% to 45%. The Building and Construction Authority had forecast the average annual construction demand for 2024 at between $32 billion and $38 billion driven by public sector, industrial and infrastructure projects such as Build-To-Order flats, cross-island MRT Line contracts, Changi Airport’s Terminal 5 construction, Tuas Port development, and major road enhancements and drainage improvement works. Private sector construction demand was projected to be between $14 billion and $17 billion.2 As such, the sector has been one of the growth drivers for the economy this year, which has benefited us. The outlook for this sector remains optimistic in the near term. Ongoing projects and new investments in renewable energy, transport, housing, and industrial works will sustain the growth of this sector. As such, we will be actively seeking new opportunities, particularly in the healthcare and public housing sector, leveraging on our strong track record in such projects, to strengthen our project pipeline. PROPERTY DEVELOPMENT AND INVESTMENT – CAUTIOUS BUT CONFIDENT The increased Additional Buyer’s Stamp Duty (ABSD) rates, especially for foreigners purchasing residential property, higher costs of borrowing, a slowing global economy and weakening consumer sentiment, have resulted in the market showing some signs of deceleration. Prices of private residential properties increased marginally by 6.8% in 2023,3 moderating from the 8.6% increase in 2022. Developers sold 6,421 private residential units for the whole of 2023 as compared to 7,099 units in the previous year. ANNUAL REPORT 2023 05
landscape with the ongoing Russian-Ukraine conflict, the more recent Israeli-Hamas war and USA-China impasse. As such, we are cautiously optimistic of the performance of this sector which may impact our hotel properties and influence our future hotel investment strategy. CORPORATE UPDATES – RATIONALISING ASSETS FOR FUTURE OPPORTUNITIES The Group disposed of its two commercial properties in Honmachi and Minamihorie, Osaka, Japan in February 2023. The properties were non-core assets of the Group, which have generated rental income since they were acquired in 2016 and 2017 respectively. With the completion of the sale and the realisation of the value of these properties, the Group has improved its liquidity and enhanced working capital to meet its financial obligations and for future investment and development opportunities. One of the Group’s subsidiaries, Hansin Timber Specialist and Trading Pte. Ltd. (“Hansin”) has been wound-up pursuant to a creditors’ voluntary liquidation. There is no significant development in relation to the liquidation to-date that would have any material impact on the Group’s financial position. With the creditors’ voluntary liquidation of Hansin, the Group is now focused on its core business activities. In respect of the Group’s 6.25 per cent notes due in 2023 (“Series 3 Notes”) issued pursuant to the $200,000,000 Multicurrency Term Note Programme, we are pleased to announce that we have The outlook for the property market in the nearer term is resultingly more cautious. With more regulatory scrutiny being accorded to purchases of high-end property in a bid to counter money laundering activities, overall buying sentiment may be impacted. Higher interest rates and increased ABSD rates are expected to negatively affect the mass market segment as well. With limited land supply and ever-increasing competition for prime locations, the opportunities for securing property development projects which will afford good returns on investment are limited. Nevertheless, we will continue to seek opportunities with good value proposition, in partnership with reputable and strong players in the industry, while remaining prudent in any land acquisitions. HOTEL DEVELOPMENT AND INVESTMENT – TOURISM REVIVAL The Maldives recorded visitor arrivals of 1.9 million from January to December 2023,4 as compared to 1.7 million over the same period last year (12.1% increase). While the tourism sector has been strong, finance and operating costs have escalated which have impacted our share of profits from our two hotel investments, Mercure Maldives Kooddoo Hotel and Pullman Maldives Maamutaa Resort in which we have a 49% equity interest. Tourism has not yet rebounded completely to pre-COVID levels. Airlines are still finding it challenging to ramp up operations given labour shortages, higher fuel, and other operating costs. Furthermore, travel may be affected by the threats of a global economic slowdown and an increasingly tense geopolitical 4 Ministry of Tourism, Republic of Maldives. KEONG HONG HOLDINGS LIMITED CHAIRMAN’S MESSAGE 06
fully repaid the principal amount of $35,250,000 which matured in August 2023. As a result, our net debt position has improved. BUILDING RESILIENCE The higher building and construction, operating, manpower and borrowing costs coupled with a slowing economy have necessitated a continued focus on minimising costs, increasing productivity, and enhancing efficiency. Digitalisation and automation remain priorities to reduce reliance on labour, given the shortage of and challenges in importing skilled labour. Building on the digitalisation experience gained from implementing Aptiv8 IT Solutions and AirSquire’s cloud-based 360-degree virtual sites at Grand Hyatt Hotel, we are continuing our IDD journey with the experimental implementation of Doxa Connex’s procurement-topayment system company-wide, and Autodesk Construction Cloud on new projects. In Maldives, Lumitics Artificial Intelligence (AI) smart food waste tracker has recently been installed at Pullman Maldives Maamutaa Resort and Mercure Maldives Kooddoo Hotel offering insights to chefs on how to reduce their food waste by up to 40% and food cost by 2% to 8%. We remained committed to the safety and betterment of our workers. We invested in worker education, particularly in areas of work and health safety protocols, and in upskilling initiatives to enable them to function safely, effectively and efficiently within the organisation. SOCIAL RESPONSIBILITY AND SUSTAINABILITY In terms of our social programmes, we supported Institute of Technical Education’s (“ITE”) Work-Learn Technical Diploma programme. We are going to provide career development training for another ITE trainee under the Work-Learn Technical Diploma programme for the academic year starting April 2024. On the sustainability front, the solar panel installation at our Chin Bee factory has been commissioned and begun providing green energy since July 2023, supplementing the power requirement at the production floors and administration blocks of 20 Chin Bee Drive and 21 Fourth Chin Bee Road. The solar panels are capable of generating 800 amperes of green electricity and offsetting up to 215 tons of CO2 per year. New sustainability initiatives have also been implemented in Maldives. Food composters have been installed at both the resort hotels to convert food waste to compost as fertilisers for the gardens. Our conservation and other sustainability efforts and goals can be found in greater detail in our Sustainability Report 2023. COMMITMENT TO LOOK FOR GROWTH We will closely monitor costs, tightly manage our operations, keenly look for growth opportunities and unwaveringly work towards improvement in all aspects of our business. While it is anticipated to be a difficult year ahead for the reasons already cited, we have navigated through numerous downturns, emerging stronger and more resilient. There is no reason to doubt that we can do so once again. Going forward, we are cautiously optimistic given the fact that there will be higher revenue recognition from the new projects awarded. APPRECIATION AND ACKNOWLEDGEMENTS I would like to thank the management, staff and our Board of Directors for their hard work and contributions this past year. I would like to welcome Ms Wong Ee Kean to our Board of Directors. Ms Wong will bring considerable expertise and experience to the Board. Her appointment as Non-Executive Independent Director marks the Group’s inaugural appointment of a female director. My heartfelt thanks go out to Mr Chong Weng Hoe, who stepped down from the Board at the end of February 2024 after 12 years of committed service. Mr Fong Heng Boo has assumed the role of Lead Independent Director in Mr Chong’s place. I would also like to extend my thanks to Mr Chiang Yi Shin, our Chief Financial Officer, for his service to the Group, as he moves on to other opportunities. Last but not least, thank you to our business partners, associates, customers, and shareholders for continuing to support the Group. We remain committed to improving our financial performance, strengthening our organisation, and realising our potential to bring greater value to all our stakeholders. LEO TING PING RONALD Chairman and Chief Executive Officer ANNUAL REPORT 2023 07
VISIBLE PIPELINE WITH CONSTRUCTION
ORDER BOOK OF $658 MILLION
NET PROFIT/LOSS AFTER TAX ($’000) Group’s net loss after tax widened to $50.8 million. FY2020 FY2021 FY2022 FY2023 (18,830) (20,180) (46,591) (50,804) GROSS PROFIT ($’000) Cost of sales increased to $195.9 million in FY2023 as compared to $178.9 million in FY2022. The increase was mainly attributable to higher construction costs and employee benefit expenses. The Group recorded a lower gross loss of $19.9 million as compared to a gross loss of $30.8 million in FY2022. The negative gross profit margin for FY2023 was 11.3% as compared to negative gross profit margin of 20.8% in FY2022. The gross loss sustained in FY2023 was mainly attributable to higher construction costs for materials and labour of pre-pandemic projects that are still ongoing during the current reporting period. FY2020 FY2021 30,781 7,488 FY2022 FY2023 (30,792) (19,941) REVENUE ($’000) Group’s revenue increased by 18.9% to $176.0 million. The increase in revenue was mainly due to the progress made in various on-going construction projects as well as increase in productivity of construction activities year-on-year. FY2020 FY2021 FY2022 FY2023 82,942 76,952 148,067 176,020 KEONG HONG HOLDINGS LIMITED FINANCIAL HIGHLIGHTS 10
RETURN ON ASSETS (PER CENT) FY2020 FY2021 FY2022 FY2023 (4.5) (5.8) (15.9) (21.6) RETURN ON EQUITY (PER CENT) BASIC EPS (SINGAPORE CENTS) FY2020 FY2021 FY2022 FY2023 (7.7) (7.5) (19.5) (21.1) NET ASSET VALUE (SINGAPORE CENTS) FY2020 FY2021 FY2022 FY2023 79.8 67.5 47.2 27.4 FY2020 FY2021 FY2022 FY2023 (10.0) (12.8) (42.6) (78.9) ANNUAL REPORT 2023 11
Singapore’s economy has decelerated compared to the previous year. The economy expanded by 1.1% in 2023 as compared to 3.8% the previous year. One of the best performing sectors was the construction sector which posted a 5.2% growth, up from the 4.6% growth in 2022.1 Against a backdrop of slowing global economic growth brought about by high interest rates and inflationary pressures. Keong Hong Holdings Limited (“Keong Hong” or together with its subsidiaries, the “Group”), registered revenue growth for the 12 months ended 30 September 2023 (“FY2023”) of 18.9% to $176.0 million, from $148.1 million for the 12 months ended 30 September 2022 (“FY2022”). The increased revenue resulted from progress made in various on-going construction projects and productivity gains from our construction activities. The Group narrowed its gross loss by 35.2% to $19.9 million from $30.8 million in FY2022. The gross loss was mainly attributable to higher construction costs for materials and labour of pre-pandemic projects that were still ongoing during the reporting period. Cost of sales increased to $195.9 million in FY2023 or by 9.6% from $178.9 million on account of higher construction costs and employee benefit expenses recorded. Resultingly, negative gross profit margin stood at 11.3% as compared to negative gross profit margin of 20.8%. The Group’s other income increased by 80.6% or $7.5 million to $16.9 million in FY2023, as compared to $9.4 million in FY2022, mainly due to the one-off gain from the disposal of two investment properties in Osaka, Japan. The Group registered a net loss of $4.8 million from its share of results of joint ventures, mainly attributable to the share of losses relating to the joint venture construction project of Punggol Regional Sports Centre. The Group’s share of net losses of associates increased to $7.8 million in FY2023 as compared to $5.5 million in FY2022, mainly attributed to its investments in the Maldives. Investments there reported a higher net loss arising from increased finance costs and operational expenses incurred during the reporting period. Consequently, the Group’s net loss after tax stood at $50.8 million in FY2023, as compared to a net loss after tax of $46.6 million in FY2022. In terms of our financial position, as at 30 September 2023, the Group’s net cash position was $12.7 million as compared to $22.6 million in FY2022. Total assets stood at $189.0 million as against total liabilities of $124.6 million (FY2022: total assets of $281.8 million and total liabilities of $172.5 million). Despite improvement in net debt position, the Group’s gearing ratio was slightly higher at 0.57 times as compared to 0.53 times in FY2022, due mainly to lower retained earnings in FY2023. The Group recorded a loss per share of 21.1 cents and a net asset value per share of 27.4 cents. BUILDING AND CONSTRUCTION – HIGHLIGHTS The Group, while benefiting from the overall robust construction sector, had to contend with inflationary pressures, particularly those associated with costs of fuel and water. Operationally, our projects have proceeded smoothly and are on target to meet their respective completion dates. 1 Ministry of Trade and Industry, “MTI Maintains 2024 GDP Growth Forecast at “1.0 to 3.0 Per Cent”, 15 February 2024. KEONG HONG HOLDINGS LIMITED FINANCIAL AND OPERATIONS REVIEW 12
Both Wilshire Residences and Sky Everton obtained their Temporary Occupation Permit (“TOP”) in August 2023. Our current ongoing projects include New National Skin Centre Phase 2, the Punggol Regional Sports Centre, the Grand Hyatt Hotel Singapore, Sky Eden @ Bedok, Solitaire on Cecil and Tengah Plantation. With the New National Skin Centre Phase 1 officially opened on 25 October 2023, works have moved on to existing National Skin Centre Phase 2. Micropiling and demolition of internal partition have been completed, with external facade replacement works in progress. The Phase 2 project is scheduled for completion in the last quarter of 2024. Having ridden out the pandemic, Punggol Regional Sports Centre is progressing well in its architectural phase, targeting for completion in the last quarter of 2024. Addition and alteration work for Grand Hyatt Hotel Singapore has gained momentum over the recent months. Phase 1 involving Terrace Wing guest rooms, main lobby reception, Pete’s Place, porte cochere and E Decks were inspected by the Building and Construction Authority (“BCA”) in February 2024 for issuance of TOP. The final phase TOP, involving Grand Wing guest rooms, is expected in the fourth quarter of 2024. Sky Eden @ Bedok has successfully overcome the challenges of constructing a new building over an existing basement. With structural progress now reaching level 2 and Level 3, the project is scheduled for completion in the last quarter of 2025. As for Solitaire on Cecil, another project to be built on an existing basement, the demolition of its existing tower has been completed. Still in early structural phase, strutting works are now in progress at the existing basement. The project is scheduled for completion in the last quarter of 2026. Early this year, we were awarded the Tengah Plantation Contract 5 main contract works by the Housing and Development Board amounting to $293.7 million, which places us in a strong position as we head into 2024. Our order book, with this latest project, is currently valued at approximately $658 million. The Tengah Plantation project is now in progress at the piling phase and is scheduled for completion in the third quarter of 2027. The BCA has projected the total construction demand in 2024 to range between $32 billion and $38 billion, mainly driven by public housing and infrastructure projects such as Build-To-Order flats, Cross Island MRT Line contracts, Changi Airport Terminal 5 and Tuas Port developments. On the private sector front, construction demand was projected to be between $14 billion and $17 billion, propelled by residential developments, the expansion of the two integrated resorts, as well as development of mixed-used properties and industrial facilities. The sector looks promising in the near term. With our strong track-record in both public and private sector projects, we will be actively seeking out opportunities particularly in the healthcare and public housing sector. PROPERTY DEVELOPMENT AND INVESTMENTS The property market, which seemed to be on a prolonged upward trajectory, is finally showing signs of slowing. For the whole of 2023, prices of private residential projects increased by 6.8% as compared to 8.6 % in 2022. Sale transaction volume for private residential properties decreased by 17% on a quarter-on-quarter basis in the fourth quarter of 2023. The total transaction volume in 2023 fell by 13% compared to 2022, and was at its lowest level in seven years, since 2016. 1,092 completed and uncompleted units were sold in the fourth quarter of 2023 as compared to 1,946 units in the previous quarter, with 6,421 units sold for the whole of 2023 as compared to 7,099 units in 2022.2 2 Urban Redevelopment Authority, “Release of 4th quarter 2023 real estate statistics”, 26 January 2024. ANNUAL REPORT 2023 13
We disposed of our tenanted office buildings in Minamihorie, Osaka and in Honmachi, Osaka for approximately $12.0 million and $12.6 million respectively with the difference between the net disposal proceeds and the carrying amount of the investment properties recognised in profit or loss. We have thus freed up cash for future investment opportunities. We believe that there will always be good investments on the market with attractive potential returns; we will seek ways to enhance our property development and investment portfolio in alignment with our risk management strategy. HOTEL DEVELOPMENT AND INVESTMENTS It was a good year for the global tourism industry with the industry recovering 87% of its pre-pandemic levels by September 2023.3 Tourist arrivals in the Maldives reached 1.88 million in 2023, an increase of 12.1% as compared to 1.68 million in 2022.4 Our two hotel investments, the Mercure Maldives Kooddoo Hotel and Pullman Maldives Maamutaa Resort reported a combined average occupancy for 2023 of 69.2% which was higher than the industry average of 57.6%. Nevertheless, it was not all smooth sailing for our hotel property investments in the Maldives as they faced higher finance costs and operational expenses which impacted profitability. We remain cautiously optimistic about this sector with the global economic slowdown, tense geopolitical landscape and higher operating costs likely to put a damper on its full recovery to prepandemic levels which will affect our future investments strategy. DIGITALISATION AND INNOVATION FOR CONTINUED GROWTH AND COMPETITIVE ADVANTAGE We are one of the pioneers in the industry here to use IT and other digital solutions such as Aptiv8’s IT solutions which digitalise the workflow and process management system, and cloud-based Airsquare’s 360-degree camera which enable remote visualisation and monitoring of work sites. We have used such solutions in our ongoing projects such as the Grand Hyatt Hotel Singapore, National Skin Centre and Sky Eden @ Bedok projects. We are continuing our IDD journey with all-in-one Oracle’s NetSuite ERP cloud business management solution that helps organisations operate more effectively by automating core processes and providing real-time visibility into operational and financial performance. We are committed to using innovative construction technology and materials to ensure best practices in all we do and to keep our competitive advantage. BUILDING A RELEVANT, SKILLED AND HEALTHY WORKFORCE Staff training, upskilling and welfare programmes remain at the forefront of our human resource strategy. We ensure all our staff, whether at our worksites or at our offices are wellequipped to function competently, efficiently and knowledgeably in a digitalised environment. Staff have undergone training in certification courses for Green Mark Manager and Specialist Diploma in Construction Productivity to ensure they can contribute effectively to the sustainable development of our business. We also provided training opportunities in production-related areas such as Good Industry Practices, Building Information Modelling (“BIM”) Management and BIM Architecture to further improve the quality of our business productions. Our basic skilled workers were enrolled for higher skills training such as in the BCA Coretrade Skills training and Multi-Skilling training. To-date, 35.3% of our 326 work permit holders are higher skilled (R1) certified, surpassing the minimum 10% as required by the Ministry of Manpower (“MOM”). As always, worker safety, mental and overall well-being are our priorities. We achieved work-site safety over and above mere compliance with the Workplace Safety and Health Act. Training in workplace safety includes designation of Peer Support Leaders 3 UN Tourism, “International Tourism to end 2023 close to 90% of pre-pandemic levels,” 30 November 2023. 4 Ministry of Tourism, Republic of Maldives. KEONG HONG HOLDINGS LIMITED FINANCIAL AND OPERATIONS REVIEW 14
to reach out to fellow workers with mental health issues or in distress. We have continued with the CultureSAFE programme to help us build a positive workplace safety and health culture, mind-set and attitude beyond mere compliance with regulatory requirements. Outside of work, we ensure our workers are healthily entertained, with sufficient facilities for exercise and recreation. We provide recreational amenities such as mini games courts, gym sites and planting corners for relaxation and well-being. We ensure that proper rest and canteen areas are provided on-site where workers can take breaks during their shifts. Our overseas staff in the Maldives were also given essential training for their jobs such as x-ray operation, airline security, wildlife hazard management training and more. In FY2023, we recorded 3,116 training hours, or 6.3 hours of training per staff and 5.6 hours of training per worker were expended. Our Sustainability Report 2023 contains in-depth reporting on our training, staff benefits and welfare, workplace safety and health initiatives. CORPORATE CITIZENSHIP AND SUSTAINABILITY We conduct ourselves graciously within the community and firmly believe in contributing positively to the well-being of society, through educational support programmes, charitable donations and other outreach initiatives. We are also committed to corporate social responsibility and environmental sustainability practices. In FY2023, in our commitment to fostering leadership and career advancement among our middle management, we supported our senior engineers and managers by sponsoring their master’s degree programs. Our manager, Mr Robin Lau, has successfully graduated with a master’s degree in international construction management from Nanyang Technological University in 2023. Just commencing the same master’s degree course is our assistant project manager, Ms Michelle Leu. Both are sponsored by the company. We continued our Institute of Technical Education (“ITE”) sponsorship, supporting ITE’s Work-Learn Technical Diploma programme. We are going to provide career development training for another ITE trainee under the Work-Learn Technical Diploma programme for the academic year starting April 2024. On the sustainability front, we have completed the installation of solar panels on the rooftop of our Chin Bee factory, abolished single-use plastics at our two resort hotels in the Maldives and installed food compressors to convert food waste to compost for fertilising the grounds. Details of these and other sustainability efforts can be found in our Sustainability Report 2023. We donated to various charitable organisations with cash donations or sponsorships of their fundraising activities. Among the beneficiaries in FY2023 were Church of The Immaculate Heart of Mary and the ITE Education Fund. OUTLOOK FOR 2024 The economic outlook is uncertain. High interest rates, inflationary pressures, and instability in the geo-political situation notably the Russian-Ukraine conflict and Israeli-Hamas war which have disrupted shipping and transportation routes, are likely to impact construction, operational and associated costs. As such, we will be cautious in our approach towards investments and prudent in our financial management. We are confident that the worst is behind us, and having navigated these very challenging years, we have grown in our resilience, agility and adaptability and are poised for new opportunities for growth with the aim of long-term corporate sustainability and returns for our shareholders. ANNUAL REPORT 2023 15
DIGITALISATION AND INNOVATION REMAIN PRIORITIES FOR CONTINUED GROWTH AND COMPETITIVE ADVANTAGE
MR LEO TING PING RONALD Chairman and Chief Executive Officer MR LEO TING PING RONALD, 72, was appointed to our Board on 15 April 2008 and was re-elected on 30 January 2023. As Chairman and Chief Executive Officer, he oversees the day-to-day operations and the Group’s strategic direction and corporate business expansion. Mr Leo also holds directorships in the Group’s subsidiaries and associated companies. Mr Leo is a civil engineer with over 40 years of post-graduate experience in the industry. From 1974 to 1983, he was a senior structural engineer in the Structural Engineering Department at Housing and Development Board (“HDB”). In 1980, as head of the construction technology unit of HDB, he spearheaded the drive towards prefabrication and mechanisation of the local construction industry. He later joined Eng Hup Heng Construction Pte Ltd from 1983 to 1985 as its general manager and was responsible for construction and management of their projects, including Housing and Urban Development Corporation, HDB housing, factories and institutional buildings. Mr Leo joined Keong Hong Construction Pte. Ltd. (“KH Construction”) in 1985 as Managing Director, where he grew the business from a subcontractor to an established design and build main contractor of Building and Construction Authority A1 Grading. He led the Group to its initial public offering on the Catalist Board of the Singapore Exchange Securities Trading Limited on 16 December 2011. The Group was subsequently transferred to the Mainboard on 2 August 2016. Mr Leo graduated with a Bachelor of Engineering (Civil) with First Class Honours and a Master of Science (Construction Engineering) from the National University of Singapore (“NUS”), in 1974 and 1977 respectively. He became a member of The Institution of Engineers Singapore and an associate of The Institute of Structural Engineers, United Kingdom, in 1978 and 1992 respectively. He was also registered as a professional engineer with the Singapore Professional Engineers Board in 1979. Mr Leo is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR ER ANG HOOA, 71, joined our Group in 1996. He was appointed to our Board on 26 September 2011 and was re-elected on 30 January 2023. He has been the Project Director of our wholly owned subsidiary, KH Construction, since June 2010. He is responsible for all operational activities relating to construction projects undertaken by our Group. Mr Er also holds directorships in the Group’s subsidiaries and associated companies. Prior to being a Project Director, he was the General Manager from 2005 to 2010, Assistant General Manager from 2001 to 2004 and Senior Project Manager from 1996 to 2000 of KH Construction. He graduated from the University of Dundee, United Kingdom, with a Bachelor of Science in Civil Engineering in 1978. He also graduated from Imperial College London, United Kingdom, with a Master of Science in Structural Steel Design in 1985. He obtained a graduate diploma in management and administration from Bradford University, United Kingdom, in 1986. Mr Er is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR ER ANG HOOA Executive Director KEONG HONG HOLDINGS LIMITED BOARD OF DIRECTORS 18
MR XU QUANQIANG, 45, was appointed to our Board on 29 March 2021 as Non-Executive Non-Independent Director. He was subsequently re-designated as Executive Director on 1 September 2022, to oversee the Group’s investments. Mr Xu also holds directorships in Forevertrust International (S) Pte. Ltd., Innotrust Pte. Ltd., LJHB Capital (S) Pte. Ltd., PT Forevertrust International Indonesia, Wisestone Pte. Ltd. and two subsidiaries of the Group. From 2013 to 2016, Mr Xu was a Director of BSI Group Singapore Pte Ltd. Apart from his directorship, he is the Chief Executive Officer of LJHB Holdings (S) Pte. Ltd. (“LJHB”), responsible for LJHB’s strategic decisions and growth plans in the region. LJHB is the controlling shareholder of the Company and is primarily in the assets investment business in real estate, hospitality and tourism sectors. He also concurrently holds the appointment as Chief Executive Officer of related companies of LJHB, namely Continental Hope Singapore Industrial Development Pte. Ltd. and Aitec International Pte. Ltd. Prior to joining LJHB, Mr Xu held senior leadership positions including Chief Executive Officer of Ronghua Group Pte Ltd, Regional General Manager of GIC Group Pte Ltd, Country General Manager of BSI Group Singapore Pte Ltd, and Assistant Vice President (Sales) of TUV SUD PSB Pte Ltd. Mr Xu holds a Master of Business Administration degree from the University of South Australia. He is a Certified Property Manager awarded by the Institute of Real Estate Management (REM) USA and a Certified Commercial Investment Member of the CCIM Institute USA. Mr Xu is an associate of LJHB. Except as disclosed, he is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR XU QUANQIANG Executive Director MR FONG HENG BOO, 74, was appointed to our Board on 1 January 2022 and was re-elected on 25 March 2022. He was appointed as Lead Independent Director on 29 February 2024. Mr Fong has over 46 years of experience in auditing, finance, business development and corporate governance. He was with the Auditor-General’s Office (“AGO”), Singapore and held the position of Assistant Auditor-General when he left AGO in 1993. Mr Fong was also the Director (Special Duties) at the Singapore Totalisator Board, where he led the finance and investment functions. He retired from the board of CapitaLand China Trust Management Limited in 2022, where he was a non-executive independent director since 2013. Mr Fong currently holds directorships in Surbana Jurong Private Limited, TA Corporation Ltd, Livingstone Health Holdings Limited, Agency for Integrated Care Pte Ltd and Bonvest Holdings Limited. Mr Fong graduated from the University of Singapore (now known as the NUS) with a Bachelor of Accountancy (Honours) in 1973. He was a Fellow Member of the Institute of Singapore Chartered Accountants. Mr Fong is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR FONG HENG BOO Lead Independent Director Chairman – Audit Committee Member – Nominating Committee, Remuneration Committee ANNUAL REPORT 2023 19
MR CHONG WAI SIAK, 76, was appointed to our Board on 1 October 2019 and was re-elected on 25 March 2022. Mr Chong joined HDB in 1971 and rose to the position of Senior Principal Structure Engineer before he was appointed in 1980 to establish and head a government owned construction company, Construction Technology Pte Ltd to spearhead and introduce mechanisation and appropriate technology in the construction industry. In 1989, he joined NSL Ltd (formerly known as NatSteel Ltd) and held various senior positions there, as Deputy President of NSL and President/CEO of its major subsidiary, Eastern Industries/Eastern Pretech Group. He was responsible for the overall management of the operations and business activities of the Group and its many subsidiaries, involved mainly in construction products and services, property development and engineering design. His work involved establishing and managing business activities in Singapore, Malaysia, Indonesia, Hong Kong, China, the Philippines, Vietnam, United Arab Emirates and Finland. He retired from the NSL Group in 2014 with wide business experience in many aspects of the building and construction industry. Mr Chong was a Director of Changi Airport Planners & Engineers Pte Ltd from 2007 to 2014. He had previously served as Council Member in Singapore Contractors Association Ltd and Institution of Engineers, Singapore and as a member in various Advisory and Technical Committees of the former CIDB and SISIR. Mr Chong graduated with a Bachelor of Science (Honours) in Civil Engineering and a Master of Science in Structural Engineering from the University of Manchester, Institute of Science and Technology, United Kingdom, in 1970 and 1971 respectively. He was a Chartered Engineer (UK) and a registered Professional Engineer with both the Singapore and Malaysia Engineering Boards. He was a member of the Institution of Civil Engineers (UK) and a member of both the Institution of Engineers, Singapore and Malaysia. Mr Chong is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR KOH TEE HUCK KENNETH, 65, was appointed to our Board on 30 September 2021 and was re-elected on 25 March 2022. He commenced his legal career in 1984 with Singapore’s then largest law practice. Whilst actively engaged in dispute resolution, his focus on infrastructure and construction work began when he joined a London-based international law firm. His practice ranges from representing clients in court, arbitration, adjudication and mediation to advisory work in engineering, procurement and construction contracts. After several years in a local partnership, he co-founded UniLegal LLC, and chaired its board of directors from 2002 to 2018. He currently serves as its consultant. Mr Koh graduated with a Bachelor of Laws in 1983 from the NUS and is an Advocate & Solicitor of the Supreme Court of Singapore. He holds memberships in the Singapore Academy of Law, the Law Society of Singapore, Society of Construction Law (Singapore) and the Singapore Institute of Directors (“SID”). He was recognised by the SID as a Senior Accredited Director on 16 January 2024. His previous appointments include being Honorary Legal Advisor to the Singapore Contractors Association Ltd. He also authored the Singapore chapters in two international publications. Mr Koh is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. MR KOH TEE HUCK KENNETH Independent Director Chairman – Nominating Committee Member – Audit Committee, Remuneration Committee MR CHONG WAI SIAK Independent Director Chairman – Remuneration Committee Member – Audit Committee, Nominating Committee KEONG HONG HOLDINGS LIMITED BOARD OF DIRECTORS 20
MS WONG EE KEAN Non-Executive Independent Director MS WONG EE KEAN, 39, was appointed to our Board on 31 January 2024. Ms Wong is currently the CEO of GSUM-Titanland Capital, a corporate finance advisory firm licensed by the Monetary Authority of Singapore and accredited with the SGX-ST. Prior to joining GSUM-Titanland Capital, she was a partner in WongPartnership LLP where she represented listed companies and institutional clients on a broad range of corporate matters. She has extensive experience in the legal, investment and corporate finance industry with a focus on REITs, infrastructure, real estate and equity capital markets. Ms Wong graduated from the NUS with a Bachelor of Laws (Honours) in 2007 and obtained a Master of Science in Real Estate in 2015. She is a board member of the Children’s Charities Association of Singapore and has been serving on the executive council of the Singapore Association for the Deaf. Ms Wong is not related to any existing Director, executive officer or substantial shareholder of the Company or any of its principal subsidiaries. ANNUAL REPORT 2023 21
MR CHIANG YI SHIN, 53, joined our Group in 2021. As the Chief Financial Officer, his responsibilities include overseeing all financial, accounting and corporate secretarial matters. Prior to joining our Group, he was the Group Financial Controller at catalist-listed AGV Group Limited. From 1998 to 2020, he was with mainboard-listed Chemical Industries (Far East) Limited, where he rose through the ranks with last held position as the Chief Financial Officer. Mr Chiang graduated with a Bachelor of Science (Economics) (Honours) degree in Management Studies from the University of London. He is a Fellow Member of the Institute of Singapore Chartered Accountants and the Association of Chartered Certified Accountants, and an Accredited Tax Adviser (GST) with the Singapore Chartered Tax Professionals. MS NG SIEW KHIM, 51, joined our Group in 1993 and is currently the Head of Contracts of our Group. She is responsible for overseeing quantity surveying, tender process administration, technical correspondences preparation and other contractual documentation. Ms Ng graduated from South Bank University (London), United Kingdom, with a Bachelor of Science in Quantity Surveying in 1997. She also obtained a diploma in Building from the Singapore Polytechnic in 1993. MR CHIANG YI SHIN Chief Financial Officer MS NG SIEW KHIM CORINNE Head of Contracts KEONG HONG HOLDINGS LIMITED KEY MANAGEMENT 22
BOARD OF DIRECTORS CHAIRMAN AND CHIEF EXECUTIVE OFFICER Leo Ting Ping Ronald EXECUTIVE DIRECTORS Er Ang Hooa Xu Quanqiang LEAD INDEPENDENT DIRECTOR Fong Heng Boo – Appointed on 29 February 2024 INDEPENDENT DIRECTORS Chong Wai Siak Fong Heng Boo Koh Tee Huck Kenneth Wong Ee Kean – Appointed on 31 January 2024 AUDIT COMMITTEE Fong Heng Boo (Chairman) Chong Wai Siak Koh Tee Huck Kenneth NOMINATING COMMITTEE Koh Tee Huck Kenneth (Chairman) – Appointed on 29 February 2024 Chong Wai Siak Fong Heng Boo REMUNERATION COMMITTEE Chong Wai Siak (Chairman) Fong Heng Boo Koh Tee Huck Kenneth COMPANY SECRETARIES Heng Michelle Fiona Lim Guek Hong REGISTERED OFFICE 9 Sungei Kadut Street 2 Singapore 729230 Tel: (65) 6564 1479 Fax: (65) 6566 2784 Website: www.keonghong.com Investor Relations: ir@keonghong.com SHARE REGISTRAR B.A.C.S Private Limited 77 Robinson Road #06-03 Robinson 77 Singapore 068896 AUDITORS MAZARS LLP 135 Cecil Street #10-01 Singapore 069536 PARTNER-IN-CHARGE Zhang Liang Appointed on 22 August 2022 PRINCIPAL BANKERS Malayan Banking Berhad Overseas-Chinese Banking Corporation The Hongkong and Shanghai Banking Corporation Limited United Overseas Bank Limited ANNUAL REPORT 2023 CORPORATE INFORMATION 23
The Company is committed to a high standard of corporate governance to ensure effective self-regulation practices are in place to enhance corporate performance and accountability. This report outlines the Company’s corporate governance practices throughout the financial year ended 30 September 2023 (“FY2023”), with specific references made to the principles of the Code of Corporate Governance 2018 (the “Code”). Pursuant to Rule 710 of the Listing Manual of the Singapore Exchange Securities Trading Limited (the “SGX-ST”) (“SGX-ST Listing Manual”), the Board of Directors (the “Board”) confirms that the Company has for FY2023 complied with the Principles as set out in the Code. The Board also confirms that where there are deviations from the provisions of the Code, explanations for the deviation and how the Group’s practices are consistent with the intent of the relevant principle, are provided in the sections below: BOARD MATTERS The Board’s Conduct of its Affairs Principle 1: The company is headed by an effective Board which is collectively responsible and works with Management for the long-term success of the company. Principal Duties of the Board All Directors objectively discharge their duties and responsibilities at all times as fiduciaries in the best interests of the Company, and hold management accountable for performance. The Board oversees the business affairs of the Group, approves the financial objectives and the strategies to be implemented by the management of the Company (the “Management”) and monitors standards of performance and issues of policy. In addition to its statutory duties, the Board’s principal functions are: (i) supervising the overall management of the business and affairs of the Group and approving the Group’s corporate and strategic policies and direction; (ii) formulating and approving financial objectives of the Group and monitoring its performance such as reviewing and approving of financial results announcement and financial statements; (iii) overseeing the processes for evaluating the adequacy of internal controls and risk management including the review and approval of interested person transactions; (iv) assuming responsibility for corporate governance and compliance with the Companies Act 1967 and the rules and regulations of the relevant regulatory bodies; (v) evaluating performance of Management; (vi) reviewing and approving the remuneration framework for the Board and key executives; and (vii) considering sustainability issues e.g. environmental and social factors, as part of its strategic formulation. The Company’s Constitution requires a Director and, the Chief Executive Offer (or person(s) holding an equivalent position), who is in any way whether directly or indirectly interested in a contract or proposed contract with the Company, to declare the nature of his interest at a meeting of the Directors in accordance with Section 156 of the Companies Act 1967 (the “Act). A Director and, Chief Executive Officer (or person(s) holding an equivalent position), shall not vote in respect of any contract or proposed contract or arrangement with the Company in which he has a personal material interest, directly or indirectly, and shall not be counted in the quorum present at the meeting. Provision 1.1 Accordingly, the Board is obliged to exercise reasonable due diligence and independent judgement when making decisions. It sets appropriate tone-from-the-top and desired organizational culture and ensures proper accountability within the Group. When there is any conflict of interest, Directors will voluntarily recuse themselves from the discussions and decisions involving the issues of conflict. CORPORATE GOVERNANCE REPORT KEONG HONG HOLDINGS LIMITED 24
Board Orientation, Training and Updates Upon the appointment of a new Director, the Company will provide him/her with a formal letter, setting out his/her duties and obligations. The Company has put in place an orientation program for all newly appointed Director(s) to assimilate him/her into his/her new role and will provide him/her with a set of the Company’s policies, terms of reference of various board committees (where applicable) and corporate meeting calendar for the year. He/She will be briefed by Management on the business activities of the Group and its strategic directions as well as the duties and responsibilities as a Director. Provision 1.2 Changes to regulations and accounting standards are monitored closely by Management. To keep pace with the regulatory changes, where these changes have an important bearing on the Company’s or Director’s disclosure obligations, Directors are briefed by the Company Secretary on the continuing obligations under the SGX-ST Listing Manual and are regularly provided with news releases, articles and updates on changes to the Listing Manual from time to time. The Directors have also been kept abreast of the principles and provisions of the Code. During the financial year, Directors had attended the Listed Company Directors courses conducted by the Singapore Institute of Directors (“SID”) such as Governance Essentials (Core), Challenges faced by SMEs in ESG Integration, Climate Reporting – Directors, How You Respond?, The Board’s Role in Leading Successful Transformation, Directors Conference 2023, and Audit and Risk Committee Seminar 2023. Directors also attended other courses and webinars conducted by leading accounting firms and organisations such as Annual Construction Law Update 2023 and Developments in Singapore Arbitration organised by the Society of Construction Law, Conference and Technical Training on the IFRS Sustainability Disclosure Standards organised by ACMF-ISSB and CFO Connect Symposium 2023 organised by CPA Australia. The external auditors also regularly update the Audit Committee and the Board on the developments in the Singapore Financial Reporting Standards (International) which are applicable to the Group. Appropriate external training for Directors conducted by the SID and other organisations will be arranged by the Company when necessary. Pursuant to Rule 720(7) of the Listing Manual, all directors have to undergo training on sustainability matters as prescribed by the SGX-ST. All the Directors have attended the LED- Environmental, Social and Governance Essentials (Core) conducted by the SID. Rule 720(7) Matters Requiring Board Approval The Board has adopted a set of internal guidelines on the matters requiring Board’s approval. Matters that are specifically reserved for the approval of the Board include, among others, any material acquisitions and disposals of assets, corporate or financial restructuring, share issuance, proposal of dividends, announceable matters, legal claims and litigation, and other matters as may be considered by the Board from time to time. Provision 1.3 Delegation to Board Committees The Board has delegated certain functions to various Board Committees, namely the Audit Committee (“AC”), the Remuneration Committee (“RC”), and the Nominating Committee (“NC”). Each Committee operates within clearly defined terms of reference and operating procedures, which are reviewed periodically. All Board Committees are chaired by an independent director. While these Board Committees are delegated with certain responsibilities, the responsibility for decisions relating to matters under the purview of the Board Committees ultimately lies with the Board. Provision 1.4 Attendance at Board and Board Committees Meetings The Company’s Constitution permits directors of the Company (the “Directors”) to attend meetings through the use of audio-visual communication equipment. Provision 1.5 The Board and Board Committees conduct meetings on a regularly basis which are planned in advance. Ad-hoc meetings are conducted as and when circumstances require. In between Board meetings, important matters concerning the Company are also put to the Board for its decision by way of circulating resolutions in writing for the Directors’ approval together with supporting memorandum, enabling the Directors to make informed decisions. Provisions 1.5 & 1.6 CORPORATE GOVERNANCE REPORT ANNUAL REPORT 2023 25
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