The rationale for acquiring Metax was described by Mr Koh in a press release  then:

&ldquo An established market player with over 35 years of experience in providing EPC services to the water and wastewater sector, Metax is exactly the type of acquisition we seek to scale up the Group&rsquo s specialist engineering capabilities. Moving forward, we will continue to explore and evaluate earnings-accretive options, both organically and through synergistic M& As, to enhance the Group&rsquo s capabilities and to enhance long-term shareholder value.&rdquo  

Koh Bros previously had secured water treatment and water-related projects, such as the Marina Barrage, and then awarded a sub-contractor' s role to Metax.

Koh Bros' CFO, John Lee.Metax' s water-treatment business is loss-making as it has fixed costs that are too high for the low volume of work on hand. 

Aside from cutting headcount with the idea of retaining only the core expertise and outsourcing the rest of the work in future, " we have gone in to reorganise, improve the work processes and improve the corporate governance in order for the company to turn around next year," said Mr Koh.

Koh Brothers is certain of benefitting from Metax' s new projects going forward   -- specifically Engineering, Procurement & Construction in  the water-treatment sector. After all, Mr Koh has assumed the post of non-executive chairman of Metax.

With synergies arising from working together, in Oct this year, Metax won a S$6.7m job  to expand Singapore&rsquo s only greasy waste receiving facility in Jurong.
Koh Bros' new precast plant in Iskandar will cater to strong demand arising from a ramp up in public housing supply in Singapore and the development of Iskandar Malaysia. Photo: Company2) Pre-cast plant in Iskandar

About 1.5 years ago, Koh Bros bought land in Iskandar to set up a pre-cast plant.

It expects to ramp up production in the S$13-m plant early next year, with full production targeted for mid-2014.

This will double Koh Bros' capacity to 150,000 cu m, of which 10% will be sufficient for its own construction projects and the remaining 90% would be sold to third parties.

If fully sold, the pre-cast components can possibly fetch up S$100 million in revenue a year, assuming an industry average selling price of S$900-$1,000 per cu m.

Net profit could then amount to about S$10 million a year, assuming 10% net margin.

For some perspective, the Group' s net profit in 2012 was $19.7 million.

Koh Bros did not reveal its revenue and profit from the sale of components for FY2012 but in an interview in The Edge weekly last month (Oct), Mr Koh was quoted as saying that the sale of precast materials contributes 5-10% of the group' s net profit currently.

Will there be enough demand for its increased supply of pre-cast products?

" There' s currently under-capacity in the market," said Mr Koh. " Most of the demand will come from HDB projects. The government has been pushing for pre-cast usage a long time ago and with the additional productivity drive, demand for pre-cast will go up even more."

It' s a sweet spot that Koh Bros is in, especially considering that it lost money in the first few years after it started 10 years ago on pre-cast production.