See Hup Seng

SHS Holdings Ltd

Print This Chairman's Statement

Dear Shareholders,

FY2017 was an extremely difficult year for the Group, with all core segments performing well below, resulting in our dismal financial results - Group revenue from continuing operations declined 33% to S$37.7 million, leading to a net loss attributable to equity holders from continuing operations of S$18.4 million, which included a one-off exceptional impairment charge of goodwill of S$9.6 million.

However, we are gratified that the worst may be over and FY2018 promises to be an exciting watershed year for our Group, as our investments in two new core businesses move out of gestation, and start to bear fruit.


Our modular construction business began with the acquisition of a 60% stake in TLC Modular Construction Joint Stock Company (TLC), a Vietnam-based company with extensive know-how in modular construction, in February 2017. Following the acquisition, the Group nurtured TLC to be in a better position to penetrate into the Australasia and Singapore markets. We are pleased to report that our inaugural volumetric project - the construction of the COSA Hotel in Christchurch, New Zealand, is expected to achieve practical completion by the second half of FY2018, while our first pre-fabricated bathroom project for Lendlease in Singapore is targeted to complete in the third quarter of FY2018.

Meanwhile, our solar energy business, through our subsidiary HDFC SinPower Limited, will focus on completing our first 50MW solar power plant project in Bangladesh by the first quarter of FY2019.

These two strategically significant projects will push into high gear the Group's transformation into an engineering & construction as well as solar energy company, and we expect our performance for FY2018 to be better than the previous year.


In view of the promising prospects of the Group, the Directors are proposing a first and final dividend of 0.20 Singapore cents as a gesture of our appreciation for your support. This is subject to shareholders' approval at the forthcoming Annual General Meeting to be held on 27 April 2018. If approved, the dividend will be disbursed on 24 May 2018.


Moving ahead, the Group envisages that the business landscape for FY2018 is showing signs of improvement. Both of our new core businesses (modular construction and solar energy business) are gaining traction coming out from their development phases, while the two existing core businesses (corrosion prevention and structural engineering business) are gradually turning around.

Our modular construction activities are currently centred on the New Zealand market, which is experiencing growth in tourism and a severe shortage of affordable homes. We are also busy with existing contracts in Singapore and Australia. With growing market acceptance of our proven technology in modular construction, we are cautiously optimistic that more contracts will follow, particularly in New Zealand, as our new technology gains acceptance with its Government's support, and in Singapore, as our first pre-fabricated bathroom project in Singapore completes in the third quarter of FY2018. Whilst the development of our modular construction business in Australasia is progressing robustly, our structural engineering business in Singapore remains challenging as the construction sector remains weak, and the competitive environment continues to add pressure on margins for our Hetat Holdings' structural engineering business in FY2018.

On 25 July 2017, Hetat Holdings, signed a three-party joint venture agreement with Japan's leading precision staircase manufacturer, Yokomori Mfg. Co., Ltd, and global steel trader Marubeni-Itochu Steel Inc, to produce and sell steel staircases in Singapore. We are pleased to be able to partner with such industry giants in bringing their cutting-edge expertise to Singapore. We believe that this will add value to the standards of buildability in Singapore's constructor industry, which is undergoing transformation in productivity and technology. Together with our rising capabilities in modular construction, we believe that our newly-acquired capability in precision steel staircases will further boost our value propositions to our customers - both existing and new.

The Group's solar energy segment will not only see the Bangladesh project come to fruition by the first quarter of FY2019, we will also increase our efforts at securing new orders for roof-top solar projects and reap value from existing projects on hand. This segment is expected to be profitable for the Group.

In addition, Group's whollyowned subsidiary, Sinenergy Holdings, signed a memorandum of understanding with Vietnam's Ninh Thuan People's Committee to develop a 300MW solar farm on agricultural land in the province of Ninh Thuan. This follows an extensive feasibility study into the potential of harnessing solar energy in Vietnam, with the conclusion that Ninh Thuan is the most suitable location for such as project. Before we proceed to sign an Implementation Agreement with the Vietnamese government, there needs to be a detailed feasibility study to be conducted, the issue of an investment licence, and the conclusion of a solar power policy and legislation to be ratified by the Vietnamese government.

We are gratified to see the gradual recovery of oil prices that are now sustaining the above psychological US$60, signaling that the worst may be over for our marine, offshore oil and gas sector, as well as our corrosion prevention business. We expect our corrosion prevention business to improve from now on, but the jury is still out as to whether these can return to profitability anytime soon. Notwithstanding, we intend to continue with our cost rationalization and productivity enhancement strategies in order to maintain an efficient cost structure while focusing on delivering value to our customers.


In complying with the Singapore Exchange's requirement for all listed companies to publish sustainability reports from FY2017, we are presenting our maiden report which is publishing from pages 14 to 31 of Annual Report 2017. By doing so, we hope to align our long-term business strategies with the universal values of achieving positive and sustainable outcomes for all of our stakeholders.


These are exciting times for SHS, and we are hoping for a bountiful harvest in the years to come. Before that happens, there is still a lot of hard work for us to do. Moving ahead, we are determined, more than ever before, to be united and focused on delivering shareholder value.

On 1 March 2018, Mr Chew Hoe Soon resigned as Non-Executive and Independent Director as well as Chairman of the Board. We wish to record our appreciation to Mr Chew for his contribution and guidance during his tenure and wish him well in his future endeavours.

In addition, Independent Director Mr Lee Gee Aik, who is also the Chairman of the Audit Committee and a member of the Remuneration Committee, has kindly consented to be appointed as our Lead Independent Director. We thank him for taking on this added responsibility and leadership.

We would also like to take this opportunity to thank our colleagues on the Board for their support and counsel, our management and staff for their commitment and diligence. We also appreciate the support of our shareholders, and look forward to a fruitful Annual General Meeting.

Have a great and rewarding year ahead!


Non-Executive, Non-Independent Chairman


Group Chief Executive Officer