Optimistic outlook for Singapore&rsquo s construction sector full recovery to take at least a year: Industry players

The construction sector has struggled to meet demands and deadlines, but firms are now slowly catching up.

OKH notes that the consideration for the property is below its book value of S$38 million, and it expects to record a loss on disposal of around S$3 million.

OKH GLOBAL said on Tuesday (Nov 8) that it will sell an industrial building in Tai Seng to Chip Eng Seng Corporation for S$35 million.

 

OHK launched a public tender in July for the sale of the property, located at 12 Tai Seng Link, which closed on Sep 5. The vendor received only one bid at S$35 million from CES Properties (Tai Seng), which is a wholly-owned subsidiary of Chip Eng Seng. 

 

A letter of acceptance in relation to the proposed sale of the property via the public tender was issued to the purchaser on Tuesday.

 

The consideration is below the book value of the property of S$38 million, and the company is expected to record a loss on disposal of around S$3 million, OKH said in the bourse filing. 

 

However, it noted that the disposal is &ldquo expected to benefit the company and its shareholders&rdquo as the property has a remaining lease of around 20 years, which could impact its future value.

 

It added that the proposed disposal will allow the group to re-allocate its resources to strengthen its financial position, and said the proposed disposal &ldquo demonstrates the group&rsquo s commitment to recycle capital for future growth and investments&rdquo . 

 

The value of the assets being disposed represented around 65.9 per cent of the group&rsquo s net tangible assets as at Jun 30, 2022.

 

OKH noted that the transaction is an &ldquo interested person transaction&rdquo . 

 

Celine Tang, who is chairman and controlling shareholder of OKH, also has ties with Chip Eng Seng. She and her husband, Gordon Tang, hold around 38.2 per cent of Chip Eng Seng shares. 

 

OKH said Celine Tang, being a common director of both OKH and Chip Eng Seng, abstained from all deliberations for the award of the public tender by OKH to the purchaser on the respective boards of both companies.

 

OKH chief executive Lock Wai Han, who also sits on the board of Chip Eng Seng, also abstained from all deliberations for the award of the public tender on the respective boards of both companies and the audit committee of Chip Eng Seng.

 

OKH said its audit committee has reviewed the terms of the proposed disposal, and is of the view that the disposal of the property is on normal commercial terms and is not prejudicial to the interests of the company and its minority shareholders. 

OKH Global to divest holdings in two companies to repay loans
 

PROPERTY Developer OKH Global has entered into a conditional share sale agreement to dispose of its holdings in Equalbase and in Deltanvil for S$51.4 million.

 

This is more than the counter' s current market capitalisation at S$28.2 million.

 

Equalbase is a logistics warehouse owner and developer with three logistics properties in Singapore and Malaysia Deltanvil is a freight-forwarding provider majority-owned by Christian Paul Bischoff.

 

The transaction involves the company' s subsidiary, OKH Transhub selling its 40-per-cent stake in Equalbase to Deltanvil. Then another OKH subsidiary, Chronoz Investment, is to sell its 15 per cent stake in Deltanvil to Bischoff.

 

There were attempts to sell the holdings to Deltanvil and Bischoff in 2017, but the buyers failed to complete the translation. There have been no interested third-party buyers in the meantime.

 

The Equalbase transaction will net OKH Global S$43.4 million the Deltanvil transaction will net S$8 million. This would result in OKH Global divesting of its entire stakes in Equalbase and Deltanvil.

 

The two transactions will result in a net loss of S$16.6 million or 24 per cent, as the book value of the Equalbase holdings was S$59 million and Deltanvil was S$9 million as of Jun 30, 2021. The completion of the transaction between Deltanvil and Paul is contingent on the transaction between OKH Transhub and Equalbase.

 

Equalbase is being divested because OKH Global is unable to meet the cash flow needed to fund Equalbase' s expansion into new development projects. The divestment of Deltanvil comes out of tough prospects and a volatile environment its logistics business has been trending down in the past few years, and OKH Global is not optimistic about the prospects of the sector.

 

OKH Holdings said: " The group also needs to improve its overall cash flow position, which would be facilitated by the sale proceeds from the proposed divestment."

 

The proceeds will go into repaying two secured shareholders' loans at an aggregate principal sum of S$40.5 million.

OKH Global has reported earnings of $5.3 million for the 1HFY2022 ended December, up 11.7% from earnings of $4.7 million in the same period the year before.

As a result, earnings per share (EPS) for the 1HFY2022 stood at 0.47 cents.

1HFY2022 revenue climbed 0.7% y-o-y to $8.2 million, thanks to the group&rsquo s property investment segment on the back of higher leasing activities and an increase in construction services.

Cost of sales increased by 9.3% y-o-y to $635,000.

Gross profit inched up by 0.1% y-o-y to $7.5 million. There was no significant change to OKH Global&rsquo s gross profit margin (GPM).

 

Other income surged 67.6% y-o-y to $925,000 mainly due to the higher grant income received during the period and the gain from disposal of property, plant and equipment.

Share of profits of associate fell 8.1% y-o-y to $1.02 million due to higher repair and maintenance cost incurred for their properties.

Cash and cash equivalents as at end-December stood at $12.7 million.

&ldquo As part of its continuous review, the group is assessing the relevance of the properties against its overall strategies. The group may monetise some of these assets through sales so as to further strengthen the financial strength of the group as it explores new business opportunities,&rdquo says OKH Global in its Feb 11 statement.