Shareholders of Koh Brothers Group (KB) should note two additional resolutions that will be discussed and voted upon at the company' s upcoming AGM involving the shares it owns in Oiltek International , says the Securities Investors Association of Singapore (SIAS).

 

The securities watchdog notes that three minority shareholders of Koh Brothers Group has raised two resolutions which have been accepted and will be discussed and voted upon at the company' s AGM on Apr 29.

 

The first proposal includes discussing the distribution of all the shares that Koh Brothers Group' s subsidiary Koh Brothers Eco Engineering (KBE) in Oiltek International, which recently received in principle approval to transfer its listing to the Mainboard of the SGX, to KBE and then onto KB shareholders.

 

The second is to appoint a financial advisor to explore options to unlock shareholder value.

 

SIAS says that shareholders of KB have raised several concerns with regards to unlocking shareholder value of late. This includes the performance of KBE, which has reported losses in recent years and which contributes the large majority of KB' s revenue.

 

Shareholders are also concerned about the lack of ongoing property developments by KB of late, and that its sole hospitality asset, Oxford Hotel, is a 130-room hotel which has poor ratings on hotel booking websites and ranked #342 out of #353 hotels in Singapore on Tripadvisor.

 

Shareholders also question whether it is opportune for KB to consider selling its stake in Sun Plaza, given that capital values are currently high, using the recent sale of Northpoint for reference.

 

Finally, shareholders question if KB' s board size of nine directors is excessive and whether some of the directors, who sit on boards of companies that operate in the same industry as KB, are conflicted. This is in contrast with larger blue chip companies like DBS which has 10 directors.

 

Given that KB' s 37.35% stake in Oiltek is worth about $67 million in contrast to the market capitalisation of KB which stands at $58 million, SIAS notes that the market does not have an overly positive view of KB.

 

Koh Brothers Group has reported a loss of $5.5 million for the FY2024 ended Dec 31, 2024, narrowing from the previous year&rsquo s loss of $22 million.

 

Earnings per share (EPS) stood at a loss of 1.32 cents.

 

Sales fell by 33% y-o-y to $238.4 million mainly due to lower revenue contribution from the completion of certain projects from the construction division. The group&rsquo s real estate division also saw lower revenue recognition from the completion of a development project.

 

Gross profit, however, surged by 157% y-o-y to $19.3 million due to improved margins from the group&rsquo s bio-refinery and renewable energy, building materials and real estate divisions.

 

The group also announced that its indirect wholly-owned subsidiary, G & W Industries (M) Sdn Bhd, entered into a sale and purchase agreement (SPA) to sell its freehold land in Johor Bahru for RM81,500,000 ($24.6 million). According to the group, the land is vacant is not being used for operations.

 

The group will net some $20.1 million from the sale.

 

On the same day, Koh Brothers Eco Engineering reported a loss of $17.1 million for the FY2024 ended Dec 31, 2024, compared to the $15.2 million loss reported in FY2023. Koh Brothers Group is the largest shareholder of the Catalist-listed company.

 

Revenue fell by 16% y-o-y to $149 million mainly from lower revenue recognised from the engineering and construction segment with the completion of certain projects. The decline is partly offset by higher revenue from the bio-refinery and renewable energy segment, driven by growing demand for edible and non-edible oils and fats, especially vegetable oils.

 

Koh Brothers Eco Engineering has won a $313.9 million contract from the Land Transport Authority (LTA) to design and build a bus depot at Lorong Halus. With this contract, the company' s order book has reached $899.7 million.

 

Works will commence on Jan 6 2025 and is slated for completion by 2029.

 

According to KBCE, the four-storey depot will have space to park at least 550 buses and will also incude admin and maintenance facilities.

 

" We will continue to strategically tender for more projects where we hold a competitive advantage, backed by our requisite track record and deepened capabilities, to maintain a healthy order book to support sustainable growth," says CEO Paul Shin.

 

On Dec 17, the company announced that it has won a contract from an unnamed public sector customer whom it could not then name except that this win is " expected to improve its existing order book."

 

Prior to this LTA contract, the company has won projects such as a $77.6 million contract from Sport Singapore, a $200.7 million contract from PUB for the Tuas Water Reclamation Plant and a $186.0 million contract from the Housing & Development Board for the Kallang Integrated Development via a joint venture.

 

Koh Brothers Eco Engineering has won a new contract from an unnamed public sector customer. However, it has yet to receive approval to disclose the contract amount, and who this client is except that this win is " expected to improve its existing order book."

 

Ahead of this announcement after market on Dec 17, the company had called for a trading halt before market on Dec 16.

 

On Nov 19, the company announced it was given a $77.6 million contract from Sport Singapore to redevelop the Toa Payoh Integrated Development site, bringing its total order book to $585.7 million.

 

Koh Brothers Eco Engineering shares last changed hands at 4.1 cents, up 105% year to date, valuing the company at $130.95 million.

 

Besides its own construction business, Koh Brothers Eco holds a stake of more than 68% in separately listed Oiltek International HQU .

 

Based on Oiltek' s Dec 17 closing price of $1.06, Koh Brother Eco' s stake is worth $103 million.

 

Oiltek International, which builds biofuel refineries and processing capacity, has seen its share price surge more than fourfold year-to-date as more investors start to appreciate its growing momentum of contract wins. Oiltek is the second-best performing stock on the Singapore Exchange S68 (SGX) year-to-date.

 

The most recent was an RM45.5 million ($13.5 million) contract in Latin America announced on Oct 29. According to Paul Chew of Phillip Securities, this opens up the possibility of more contracts in this market, which is a leading palm oil producer along with Malaysia and Indonesia.

 

This new contract brings the cumulative new contracts secured in this current FY2024 ending December to RM197.8 million and its total order book to a record RM400.9 million. Oiltek shares enjoyed additional growth momentum when, on Nov 19, it announced 3QFY2024 ended September earnings of RM8.98 million, up 83.2% y-o-y, bringing 9MFY2024 earnings to RM19.3 million, up 63.9% y-o-y.

 

The company says it is riding on a long-term trend of growing demand for edible oil that is in line with population growth. &ldquo This trend potentially benefits the group as it provides solutions that cater to all types of vegetable oils, including palm oil, soybean oil and rapeseed oil, which are some of the major agricultural commodities in the world,&rdquo says Oiltek in its Nov 19 statement.

 

Buoyed by this recent news flow, Oiltek&rsquo s share price has shot up to close at $1 on Nov 20, handily outperforming the broader market, which has enjoyed a gain of around one-third so far this year.

 

At this level, Oiltek&rsquo s share price has over-shot Chew&rsquo s Nov 1 target price of 70 cents, which is pegged to 15 times FY2024 earnings. &ldquo We believe the current wave of orders includes more turnkey projects and an investment cycle underway in Latin America,&rdquo says Chew.

 

On Nov 20, Chew raised his target price to $1.19 after Oiltek&rsquo s 9MFY2024 patmi surpassed his expectations at 83% of his full-year forecast. &ldquo A combination of geographical mix and project timing has boosted 9MFY2024 margins by five percentage points,&rdquo he says, adding that 9MFY2024 revenue was lower than expected at 67% of his full-year estimate.

 

The analyst has raised his earnings estimates by 11% to RM25.8 million, expecting higher gross margins for Oiltek. He has also revised his Singapore dollar and Malaysian ringgit exchange rate assumption to RM3.33, down from RM3.45. However, he has reduced his FY2024 revenue estimate by 10% to RM224.4 million. Chew has maintained his &ldquo buy&rdquo rating.

 

Meanwhile, a quick look at Oiltek&rsquo s top 20 shareholders list shows a few notable names. Teo Hark Piang, CEO of another Singapore-listed company, Union Gas Holdings 1F2 , holds 450,000 shares, equivalent to a stake of 0.31%. Goi Kok Ming, another of the top 20 shareholders, has the same number of shares. He is the son of Sam Goi Seng Hui, the executive chairman of food and consumer products manufacturer PSC Corp. Both Gois are also on the board of property and hospitality firm GSH Corporation BDX , where the father is the executive chairman and the son is the executive director.

 

Investors may also consider another company to capitalise on this momentum: Oiltek&rsquo s largest shareholder, Koh Brothers Eco Engineering 5HV , which is listed separately on the SGX. As indicated in Oiltek&rsquo s annual report, as of March 15, Koh Brothers Eco Engineering holds 68.14% of the shares. Koh Brothers Eco Engineering is also up 50% year-to-date to close at 3 cents on Nov 20. In contrast, its subsidiary Oiltek&rsquo s market cap has already reached $143 million as of Nov 20, valuing Koh Brothers Eco&rsquo s stake at some $84.5 million as of the same day &mdash more than its total market cap.

 

The parent company of Oiltek has also seen signs of business improvement. On Nov 19, it announced winning a $77.6 million contract from the Singapore government for piling, ground improvement and related works at the Toa Payoh Integrated Development site.

 

The 18-month contract, which began on Nov 19, is set for completion by May 2027. The site was previously home to a restaurant, car parks and the Toa Payoh Sports Complex. The planned integrated development will include sports, healthcare, library and park facilities.

 

The Toa Payoh contract will increase Koh Brothers Eco&rsquo s total order book to $585.7 million. This follows previous wins, including a $200.7 million contract from the PUB for the Tuas Water Reclamation Plant and a $186 million contract from the HDB for the Kallang Integrated Development, which was won together with partner LBD Engineering.   

It will be responsible for piling, ground improvement and earth retaining stabilising structure installation in this first contract with SportSG

 

CATALIST-listed engineering solutions provider Koh Brothers Eco Engineering : 5HV 0% was awarded a S$77.6 million contract by Sport Singapore (SportSG) through its wholly owned subsidiary, Koh Brothers Building & Civil Engineering Contractor (KBCE).

 

Under the 18-month contract commencing Nov 19, KBCE will be responsible for piling, ground improvement and earth retaining stabilising structure installation at the Toa Payoh Integrated Development site.

 

This includes constructing foundation piles and stabilising structures according to specifications at the existing Toa Payoh Stadium site that was previously occupied by a restaurant, car parks, ancillary buildings and the Toa Payoh Sports Complex.

 

Koh Brothers Eco on Tuesday (Nov 19) said it expects the work to be completed by May 2027.

 

Its latest contract with SportSG, on top of other recently secured new orders since Jun 30 this year, is estimated to lift the group&rsquo s order book to an estimated S$585.7 million till 2027.

 

Koh Brothers Eco chief executive Paul Shin noted that it also represents the group&rsquo s first contract with SportSG.

 

&ldquo We will continue to leverage our deep expertise in construction and civil engineering to capitalise on the strong demand in the public sector,&rdquo said Shin. 

 

He added that the group&rsquo s order book remains well-supported by ongoing contracts with Singapore&rsquo s public utilities and housing boards.

 

As KBCE holds an A1 grade from the Building and Construction Authority for both building and civil engineering categories, the company is allowed to tender for building and civil infrastructure projects of unlimited value.

 

Major public infrastructure projects that KBCE has participated in include the development of River Valley High School and a hostel at Boon Lay Avenue (both commissioned by the Ministry of Education). It also constructed the Singapore Civil Defence Force Headquarters Complex in Ubi, which was commissioned by the Ministry of Home Affairs.

 

The upcoming Toa Payoh Integrated Development is scheduled for completion in 2030 and will comprise sports, healthcare, library and park facilities.

 

Plans for the project were first announced in early 2023 by SportSG, which said it also intends to house the national training centres for aquatics, netball and table tennis there.

 

Other proposed facilities within the 12-hectare development &ndash located between Lorong 6 Toa Payoh and the Pan-Island Expressway &ndash include swimming pools, indoor sports halls, a football stadium and a gymnasium.