Almost a year has passed since KSH Holdings (KSH) made its maiden appearance on the SGX Mainboard. Listed on 8 February, KSH ended 2007 on a bright note by registering a remarkable 167% premium over its IPO price of $0.36 apiece – bolstered by the flourishing property and construction scene in the Lion City.

Having appreciated by such a substantial amount last year, the burning question dangling in the minds of most investors and shareholders must surely be whether there would be ample room for further increase in 2008.

PROMINENT PLAYER IN BOOMING INDUSTRY
Armed with more than 27 years of experience in the construction sector, KSH prides itself as a well-established construction, property development and property management group. Notably, through its wholly owned subsidiary, Kim Seng Heng Engineering Construction, KSH is registered as an “A1” main contractor under the general building category with the Building and Construction Authority.

For the uninitiated, the “A1” grading renders KSH the capability and capacity to tender for public sector construction projects of unlimited value. A check with the management of KSH revealed that presently there are about 32 such contractors in existence. So, what makes KSH stand out from the crowd?

“Our track record definitely puts us in good stead,” Choo Chee Onn, executive chairman and managing director of KSH told Shares Investment during an exclusive interview. “While most of our competitors are concentrating on residential projects, KSHʼs portfolio spreads across multiple segments, including residential, commercial, industrial, power plant, hospital, hotel and school campus,” Choo remarked.

Illustrating the width of its extensive track record, KSH earlier clinched a prestigious $119.8m contract from Sino Land for the construction of the luxury, boutique Clifford Pier Hotel. In March last year, the company was also awarded an $86m deal by Guthrie Properties to construct a 5-storey shopping complex at Tampines Central 1.

EXPERIENCING IMPROVED MARGINS
“Not only the width, the depth of our track record is also an area which not many contractors can compete against,” commented Tony Tang, CFO of KSH. “Apart from HDB, terrace and mid-range condominium projects, KSH has also ventured into constructing high-end residential projects, such as The Coast and The Berth By The Cove, which generally command better margins,” Tang added.

Demonstrating KSHʼs expertise and reputation in the high-end residential segment, the company bagged two new contract from the Ho Bee Group towards the end of last year. Valued at $64.8m, the fi rst contract is for the construction of a condominium project, Turquoise at Sentosa Cove, which is scheduled to commence next month. The second project, The Orange Grove at Stevens Road, is a 12-storey residential condominium block valued at $53.2m.

Adding another feather to its cap, KSH is also one of the few building contractors in the market with in-house structural steel fabrication capabilities. This allows the company to become less dependent on external suppliers for structural steel. More importantly, KSH is able to capture handsome margins from the fabrication and erection of steel structures, thus lessening the impact of rising construction costs.

Deriving the bulk of its revenue from the construction operations in Singapore, KSH recognises the need to diversify its revenue stream. In November 2007, the company successfully acquired a freehold site at Mergui Road for $120m in a bid to expand its property development business on local shores. This prime site has the potential for redevelopment into a high-rise residential block comprising 142 units of luxurious apartments averaging 1,250 square feet each.

ENLARGING OVERSEAS FOOTPRINT
Reducing its reliance on the Singapore market, KSH has penetrated into Malaysiaʼs construction industry in June 2006 through securing a $32m contract to construct an assembly plant in Selangor. More recently, the company also bagged
a $7.2m contract for the construction of a warehouse and office in the same state. Both deals were awarded by Tan Chong & Sons Motor Co Sdn Bhd. Besides Malaysia, KSH has also established a presence in the PRC, where it is principally engaged in the business of property development and property management, since 1997. So far, KSH has developed two properties, namely Tianxing Riverfront Square, a 36-storey commercial complex in the heart of Tianjinʼs business district, as well as Liang Jing Ming Ju, a mid-range residential condominium complex situated in Tongzhou, Beijing. According to Choo, phase 3 of the Liang Jing Ming Ju project was completed in 1Q07. While all 1,860 residential units in the first three phases have been fully sold out, Choo highlighted the fact that the selling price per sqm has doubled between phase 1 and phase 3, from Rmb2,800 to Rmb5,600. Phase 4 is expected to begin upon approval by relevant authorities, with the management anticipating a selling price of approximately Rmb7,000.

To further entrench its position in the Middle Kingdom, KSH has reiterated its intention to continue to look for second-tier cities in the PRC to expand its property development and management business. Meanwhile, the company already has plans to develop a mid-range residential development in Zhuozhou Hebei Province, which is 60km south of Beijing.

ON STEADY GROWTH PATH
From FY04 to FY07, KSHʼs top- and bottom-line grew at a CAGR of 36.3% and 10.3% respectively. For the half-year ended 30 September 2007, the company posted an 18% increase in net earnings on the back of a 30% revenue rise, which was mainly attributable to higher contribution from the local construction business.

Recently, KSH underwent a 2- for-1 share split. Choo believes that this particular exercise will help to improve the companyʼs liquidity and affordability. “Also, investors who are not very sophisticated might have the wrong perception tha KSH is much more expensive compared to its industry peers. Hopefully, a share split will make the company look more attractive to these people,” Choo said.

Despite the recent market selldown, where its industry peers witnessed millions of dollars wiped off their market capitalisation, KSHʼs share price has held up fairly well in the face of adversity. Judging from its burgeoning order book and glowing track record, KSH appears determined to surpass its 2007 performance and scale even greater heights in the new year.