RISING costs in the construction sector sent mainboard-listed Keong Hong Holdings : 5TT 0% deeper into the red for FY2023.

The company saw its net loss widen 7.8 per cent to S$49.5 million for the year ended Sep 30, 2023.

On a per-share basis, Keong Hong’s FY2023 loss widened to 21.06 Singapore cents, from 19.53 cents.

This came even as its full-year revenue rose 18.9 per cent to S$176 million, as the company progressed in ongoing construction projects and saw greater productivity. It also recorded a one-off gain from the sale of two investment properties in Osaka, Japan.

Keong Hong’s net loss for the six months ended Sep 30 came in at S$45.8 million, higher than the year-ago S$35.4 million loss. Revenue for the half year fell 38 per cent to S$57.9 million.

Steeper costs

Founded in 1983, Keong Hong specialises in residential, commercial and industrial building construction. It also engages in property development and investment, and has a hotel business in the Maldives with two resorts.

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The company’s construction business has had a challenging 2023, with higher costs for materials and labour, as well as employee benefit expenses. Its cost of sales rose to S$195.9 million in FY2023, from S$178.9 million in FY2022. Administrative expenses climbed 11 per cent to S$18.2 million.

Higher costs in the Maldives also weighed on the company’s full-year performance. Its associate that owns and manages an airport and hotels in the Maldives reported a wider net loss from higher finance costs and operational expenses.

As a result, Keong Hong saw a greater share of net losses from associates of S$7.8 million in FY2023, compared to S$5.5 million in FY2022.

That said, Keong Hong highlighted that combined average occupancy of its Mercure Maldives Kooddoo Hotel and Pullman Maldives Maamutaa Resort for 2023 stood at 69.2 per cent – higher than the industry average of 57.6 per cent.

Challenging outlook

Despite higher manpower, fuel and utility costs, Keong Hong is positive on the outlook for the building construction sector. It will be seeking new opportunities in the healthcare and public housing segments.

Its construction order book stood at S$364 million as at Sep 30, 2023. The recent award of a tender by the Housing and Development Board for building works at Tengah Plantation will raise its order book to S$658 million; residential projects form 55 per cent of the portfolio, while commercial projects make up the remainder.

With the Tengah Plantation contract, Keong Hong “will be in a stronger position as we progress into 2024”, said its chairman and chief executive Ronald Leo. He also noted that the company has secured its first mixed-use commercial construction project in the Central Business District, Solitaire on Cecil, to be completed in 2026.

On the property development and investment front, Keong Hong sees signs of deceleration in the market, with increased Additional Buyer’s Stamp Duty rates, higher costs of borrowing, a slowing global economy and weakening consumer sentiment.

But it is still on the lookout for “good value” opportunities with industry partners, albeit remaining prudent on any land acquisitions.

“While it is anticipated to be a challenging year ahead, we are cautiously optimistic that the worst is behind us,” said Leo.

Keong Hong had S$12.7 million in cash as at Sep 30, 2023, and a gearing ratio of 0.57 times. Its shares ended Wednesday flat at S$0.16.