koon holdings limited - listed...

KOON HOLDINGS LIMITED

INVESTOR PRESENTATION (SEPTEMBER 2012)

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The information contained in this presentation is strictly confidential. This presentation and the information contained herein may not be reproduced, disclosed or distributed to any other person. By viewing and/or reading this presentation, you agree not to reproduce, disclose or distribute, in whole or in part, the contents of this presentation and agree to be bound by the limitations and restrictions described herein. This presentation does not constitute an invitation or an offer to sell, or solicitation of an offer to buy any securities on in connection with, any contract or commitment whatsoever. This presentation has been prepared exclusively for the parties presently being invited for the purposes of discussion. Information contained in this presentation does not constitute a prospectus or offering circular in whole or in part.

Disclaimer

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Infrastructure Specialist With a Strategic Focus on Precast & Investments

Key Facts

SGX Stock Code: 5DL

ASX Stock Code: KNH

Bloomberg: KNH:SP

Reuters: KNH.AX

Issued and outstanding shares: 164,208,000

Listed on Australia Stock Exchange (ASX) on 11th July 2003

Listed on Singapore Exchange Securities Trading Limited (SGX) SESDAQ on 21st July 2003 and was upgraded to Main Board on 4th February 2010

Founded in 1977

One of Singapore’s largest civil engineering, precast, reclamation and shore protection specialists

Registered under the A1 category in civil engineering with the Building and Construction Authority (“BCA”), ability to bid for civil engineering projects in Singapore with unlimited contract value

Owns two out of ten precast companies in Singapore with the highest BCA license to tender for precast work with unlimited value

Blue-chip clientele base which includes the Singapore Government

Key Stock Information

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Infrastructure Construction & Civil Engineering

Precast Concrete Works

Property

Electric Power Generation

Primarily engaged in two main sources of infrastructure activities: reclamation and shore protection; and civil engineering Ability to bid for civil engineering projects in Singapore with unlimited contract value Possesses the relevant safety, quality and environmental certifications – ISO 9001:2008, ISO 14001:2004 and OHAS 18001:2007

Operates 3 yards in Singapore and Malaysia (Johor) with more than 23 production lines, spanning a total yard area of 133,000 sqm Approved Precaster for HDB Projects with highest BCA L6 license; ability to bid for precast concrete works in Singapore with unlimited contract value Ability to cross-market precast products and offer more integrated product and services

Owns 71.2% equity stakes in Tesla, an Australian energy infrastructure company which has attained capacity credit allocations from the Independent Market Operator of Western Australia Tesla’s first 9.9MW diesel power plant was commissioned in August 2011 Construction of additional three 9.9 MW diesel power plant is expected to be completed in the second half of 2012

Synergistic Business Model

Owns majority stake in GPS Alliance Holdings Pte. Ltd. that owns premier real estate agency, Global Property Strategic Alliance Pte. Ltd., which is involved in a wide spectrum of real estate services Owns 15% stake in the Joint Venture Company to develop an Executive Condominium at Pasir Ris Strategic expansion into new property-related businesses such as property valuation and advisory service as well as home furnishing

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Corporate Structure

Infrastructure Construction &

Civil Engineering


Electric Power Generation

Property

Econ

Contech

Tesla GPS Koon

Construction & Transport

Entire Construction

Entire Engineering

INFRASTRUCTURE CONSTRUCTION &

CIVIL ENGINEERING

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Introduction

Infrastructure

1. Container/Terminal Yard 2. Marine Structure 3. Drainage 4. Road/Highways

Reclamation

1. Shore Protection 2. Dredging 3. Sandfiling

Environmental Engineering

1. Sewage 2. Water/Drains 3. Power 4. Soil Improvement Work

Infrastructure Construction and Civil Engineering

BCA A1 category in construction-civil engineering (eligible to tender for public projects of unlimited value)

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Competitive Strengths

Strategic partnership with international marine engineering and construction companies such as Penta-Ocean, Boskalis International, China Harbour and Hyundai

With over 30 years of experience and accumulated capabilities, the experienced management team has successfully completed various large scale private and public projects

Wide range of products and services increases efficiency and project management capabilities in the time-sensitive infrastructure construction industry with the highest level of BCA certification in Civil Engineering

Wide Range of Infrastructure Construction & Civil Engineering Solutions

Experienced Management Team

Strong Industry Recognition

Awarded the BCA Construction Excellence Award 2012 in Civil Engineering for Serangoon Reservoir project

Serangoon Reservoir

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Public sector tenders for various government agencies such as Housing Development Board, Public Utilities Board, JTC Corporation, etc.

Contract Period: 2 years

Contract Bid Size: S$30 million to S$50 million

Targeted Sectors:

1. Infrastructure (MRT and road)

2. Marine engineering works

3. Coastal protection

4. Land reclamation

5. Water and sewage plant

6. Environmental engineering

General Profile of Koon’s Contracts

Outstanding Order book of S$130.8 million as at 27 Aug 2012

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Order Book

Current domestic projects Project Total contract value

(S$’ mil) Remaining contract value (S$’ mil)

Rehabilitation and Earthworks at Landfill Site off Tampines Road

40.10 31.9

Seletar Link and Widening of TPE 37.90 19.8

Infrastructure Works at PSA’s Pasir Panjang Terminal 2

21.0 21.0

Infrastructure Works at Changi East 15.74 3.40

Tampines Logistics Park Infrastructure Works

15.25 4.56

Construction of Sea Water Intake Facilities 14.70 14.70

Shore protection works at Jurong Island 12.50 12.50

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Track Record

Wetland at Lorong Halus Sentosa Cove Pang Sua Canal

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Industry Outlook

(S$’ bil) 2010 2011 2012 (forecast)

2013 (forecast)

Public sector 8.3 15.2 13.0-15.0

Private sector 17.4 16.8 8.0-12.0

Total value 25.7 32.0 21.0-27.0 19.0-27.0

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101520253035

2010 2011 2012 (forecast)

Public sector Private sector Total value

S$’ bil

Source: BCA (11 January 2012)

Note: (1) Chart represents maximum range of forecast

PLANT AND EQUIPMENT RENTAL

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Plant & Equipment Rental

This division, which owns and manages the Group’s plant and equipment focuses on the rental of these plant and equipment to external clients as well as the deployment for internal usage. It allows the Group to centralise its procurement of plant and construction equipment to generate cost efficiencies, while adequately supporting the Group’s construction requirements as well as tap on the opportunities in the robust construction market to maximise utilisation rate of its construction equipment.

Centralised Procurement

Internal Usage

Rental

Cost Savings and Maximise Utilisation Rate

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Plant & Equipment Rental

Construction Machinery: Crawler Cranes Excavators Lorry Cranes Tipper Trucks Vibratory Soil Compactors Wheel Loaders Others

Construction Equipment: Pabool Pump Electrical Submersible Pump Diesel Water Pump Chemical Treatment Plant Others

Hydraulic Crawler Crane Hydraulic Excavator Grab Dredger

Marine Construction Vessels(1): Dredgers

(1) The specialised vessels are strategically retained within the Group to target the robust opportunities in the niche marine construction activities.

PRECAST CONCRETE WORKS

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Increased Productivity

Time and Cost Savings

Quality Control


Benefits of Precast Products

While having minimal cost differences with conventional cast in-situ products, precast products also offer the following advantages: Simplify on-site construction process and reduce wastages; hence generating time and cost savings

Increase productivity; hence reducing the number of foreign workers and thus translating into cost efficiencies for developers

Better quality control as precast works undergo internal and external quality testing

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Introduction

Key Facts

Acquired 100% of Contech Precast Pte Ltd for S$1.78 million in 27 August 2010

Acquired 75% stake in Econ Precast Pte Ltd for S$3.75 million on 25 March 2010

A total of ten companies in Singapore have the highest license (L6) from Building and Construction Authority of Singapore (“BCA”) for precast concrete works, of which two of these companies are owned by the Group.

Ability to bid for precast concrete works in Singapore with unlimited contract value

Contech Precast is the only qualified local manufacturer for precast tunnel segment used in MRT projects in Singapore

Operates two yards in Singapore and one in Malaysia (Johor) with more than 23 production lines, spanning a total yard area of 133,000 sqm

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Order Book

16%

84%

Econ & Contech

Other Precasters

Estimated Market Share

As at Aug 2012

S$69 mil

Precast Order Book

S$51 mil

As at Aug 2011

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Yards & Facilities

Singapore (Kranji Yard) Malaysia (Johor Yard) Singapore (Bukit Batok Yard)

Singapore Production Capacity (m3/mth) Land Area (m2)

RC Piles Precast

Econ 3,000 5,000 38,000

Contech - 7,000 47,000

Sub-total 3,000 12,000 85,000

Malaysia

Econ

6,000 3,000 48,000

Grand Total 9,000 15,000 133,000

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Comprehensive Range of Precast Products

- With the acquisitions of Econ and Contech, the Group is able to manufacture a portfolio of complementary precast products

- Significant increase in the range of products offered by the precast division

Quality Assurance

- Testament to our commitment to delivering quality products, our precast division is awarded with ISO 9001:2008

- In addition, we have received SS EN 206-1:2009; SS544: Part 1 & 2:2009; SAC CT 06:2010 for the product certification of Ready-Mixed Concrete in July 2010

Trademark and License

- Capability to design and manufacture various types of precast components

- Equipped with highest BCA L6 licenses, we are one of the few precasters in Singapore with the ability to bid for contracts of unlimited value

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Strong Collective Efforts

- Increased capability and capacity to bid and undertake larger projects by ourselves

- A key factor as we progressively expand the size of our precast order book since August 2010

Track Record

- The combined track record of both companies extends to more than 30 years

- Involvement with projects for several local and overseas developer, contractors and government bodies (such as HDB and LTA)

Partnership and Support from Koon

- Ability to cross-share and implement relevant processes to improve operational efficiency

- Financial support from parent company to obtain better financing terms

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Product Range

Prestressed Beams

RC Piles

Ring Segment Water Tank

Insert Pictures Reinforced Concrete Pipes Space Adding Item

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Track Record

Pinnacle@Duxton Tunnel Segment (MRT, DTSS) Sengkang LRT Project

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Tunnel Volumetric Staircase Lift Shaft


Track Record

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17,700

25,000 25,000

-

5,000

10,000

15,000

20,000

25,000

30,000

2010 2011 2012(forecast)


Industry Outlook

New flats under BTO

Source: HDB

Units

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Industry Outlook

Property

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Property

GPS Alliance Holdings

Key Facts

Acquired 51% of the issued capital in GPS Alliance Holdings Pte. Ltd. (“GPS Alliance”), for S$3

million

Based in Singapore, GPS Alliance is an investment holding company that owns premier real estate agency, Global Property Strategic Alliance Pte. Ltd. (“GPS”), which is involved in a wide spectrum of real estate services

GPS Alliance was accorded with one of the five Most Promising Entrepreneurs Award in Global Entrepreneurs Roundtable 2012 held in Kuala Terengganu, Malaysia

Newly-established GPS Alliance Appraisals Pte. Ltd. (“GPS Alliance Appraisals”) to provide property valuation and advisory services

Owned 85% stake in Muse Living Pte. Ltd. (“MUSE”) which provides home furnishings, design consultancy and installation services

Synergistic addition to the Group’s business model; leverage on GPS Alliance’s network and market knowledge in the real estate market to explore property development opportunities

Provide integrated one-stop services from construction, marketing, consultancy, property management and home

furnishing solutions to developers

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Property

Joint Venture in EC Development

Key Facts

Owns 15% stake in the Joint Venture Company (HUGE Development Pte Ltd) to develop Watercolours Executive Condominium at Pasir Ris Drive 3 / Pasir Ris Link

The structure of the Joint Venture Company: EVIA Real Estate Pte Ltd (34%), Maxdin Pte Ltd (30%), Ho Lee Group Pte Ltd (21%) and GPS Alliance Development and Investment (15%)

Maxdin Pte Ltd and Ho Lee Group Pte Ltd have been awarded the tender for the land parcel at the tender price of S$122.2 million

The size of the EC site is approximately 18,500 square metres with estimated dwelling units of 400

The Group’s real estate agency unit, GPS Alliance, will be responsible for the marketing strategy and sales of this residential development

Growing synergies from its real estate agency unit

Watercolours Executive Condominium

INVESTMENTS

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Investments

Tesla

Key Facts

Owns 71.2% equity stakes in Tesla for a total consideration of approximately A$10.5 million. Tesla has been allotted capacity credits to generate power by Western Australian Independent Market Operator (“IMO”), allowing it to access and supply electricity to the state grid system

Capacity credits provide an incentive for the initial capital investment by granting power generators a recurring source of income

Commenced operation of its first 9.9MW diesel power plant in Western Australia (A$7.0-8.0 million or S$9.3-10.6 million) in August 2011. It has also secured sites for the construction of three additional 9.9MW power plants which will be completed in the second half of 2012

Opportunity to leverage on Tesla’s network to tap into the infrastructure industry in Australia

Two-tier revenue structure upon operational of the power plants

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Investments

Tesla

Industry Outlook

Western Australia has seen record breaking power consumption levels over the recent

years, as the state experienced varying weather conditions

Power consumption hit a high of 4,068 MW during the summer (January 2012)

In Australia, when there is insufficient capacity to meet the electricity demand, the government will hold an auction to solicit bids for supply of electricity to the government. Maximum Reserve Capacity Price is the highest price government is willing to pay for any additional electricity supplied per MW annually (see

chart on next slide)

Tesla’s power plants are tailored towards meeting peak demand needs; there will be further opportunity for

increased revenues from electricity generation in the future

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100,000

120,000

140,000

160,000

180,000

200,000

220,000

240,000

260,000

2008/2009 2009/2010 2010/2011 2011/2012 2012/2013 2013/2014 2014/2015

Source: Independent Market Operator of Western Australia

Maximum Reserve Capacity Price A$ per MW

Investments

Tesla

1H12 FINANCIAL HIGHLIGHTS

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Income Statement

S$’ mil 1H12 1H11 Change Comments

Revenue 99.3 35.7 +178.4% An increase in Construction revenue on the back of the Tampines Logistics Park project, the rehabilitation and earthworks at a landfill site off Tampines Road, the construction of the Seletar Link vehicular bridge and the widening of the Tampines Expressway

Higher revenue from the Precast division paralleled increases in contracts

secured Contribution from the new Property division that was acquired in July 2011

Gross Profit

11.0 3.0 +263.8% Key contributions from the Precast division. Partially offset by lower gross profit margin contracts from the Construction division

Year end: 31 Dec

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Income Statement

S$’ mil 1H12 1H11 Change Comments Other Income 1.6 9.6 (83.4%) One-off gain on disposal of leasehold property and non-recurrent dividend

income from Koon Zinkcon of S$5.6m and S$3.0m, respectively in the year ago period

Administrative Expenses

(9.3) (6.4) +45.8% Increased expenses mainly due to the inclusion of the property and electric power generation business

Distribution Costs

(1.7) (0.2) +573.4% In line with the sales increase from the Precast division Addition of marketing and advertising expenditure from Property division

Net Profit 0.5 6.3 (91.4%) Lower profit primarily due to inclusion of $8.6m one-off non operating income in 1H11 arising from the gain on disposal of property and non-recurrent dividend income from Koon Zinkcon

Year end: 31 Dec

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1H12 Revenue Breakdown

Division S$ million Notes


41.3 The 40.5% growth experienced was mainly due to various project completion and project timing

Precast

47.9 Strong growth

Property

9.7 Maiden revenue contribution from the Property division that was acquired in July 2011

Electric power generation 0.5 Maiden revenue contribution from increased stake in Tesla in March 2012

41.5%

0.5%

48.2%

9.8%

Construction

Electric

Precast

Property

82.3%

17.7%

1H11 1H12

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Balance Sheet

(S$’ mil) As at 30 June 2012

As at 31 December 2011

% Change

Current Asset 103.0 79.2 +30.0

Non-current assets 75.3 43.0 +75.2

Total assets 179.3 122.2 +46.0

Current liabilities 90.9 61.4 +48.0

Non-current liabilities 27.6 5.4 +411.8

Total liabilities 118.5 66.8 +77.3

Total equity 59.8 55.3 +8.0

Healthy balance sheet with net cash position

Cash and cash equivalents of S$16.3 million as at 30 Jun 2012

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Interim Dividend

0.5 0.5

0

0.2

0.4

0.6

0.8

1

1H11 1H12

Interim dividend

Sin

gap

ore

cen

ts

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Key Financial Ratios

1H12 1H11

Gearing(1) 0.16x 0.08x

Debt To Equity Ratio(2) 1.9 0.9

Return On Equity (ROE) 1.0% 12.0%

Earnings Per Share (Singapore cents)(3) 0.33 3.85

Net Tangible Value Per Ordinary Share (Singapore cents) 33.06 31.77

Share price as at 30 Aug 2012 (Singapore cents) 20.5

Note: (1) Gearing = (Bank loans and bill payable + Long term bank loans)/Total Assets (2) Debt To Equity Ratio = ((Total Liabilities - Cash And Cash Equivalents)/Equity attributable to owners of the Company)

(3) Earnings Per Share equals to earnings from continuing and discontinued operations divided by the weighted average number of ordinary shares on issue

GOING FORWARD

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Leverage on our proven track record and capabilities to tap domestic demand for niche construction, marine and civil engineering projects

Ride on the steady demand for infrastructure and civil engineering projects in countries around the region

Continue to undertake projects with a margin-centric business approach

Moving up the value-chain

Infrastructure Construction

& Civil Engineering

Platform for Business Diversity and Growth

Precast Concrete Works Investments

Improve sales and distribution channel and expand product range of precast division

Cross-market precast products to customers of infrastructure construction and civil engineering business units

Expansion into regional markets

Four Pillars of Growth

Strong cash position to fund strategic M&A business opportunities

Continue to explore investment opportunities that create synergies with the Group’s operating businesses

Investments to generate diversified streams of recurring revenue, profit and cash flow back to the Group

Property

Strong management team with proven track record in Singapore’s real estate agency market

Ability to provide integrated one-stop services from construction, marketing, consultancy, property management and home furnishing solutions to developers

Gateway to property development opportunities in the region

END OF PRESENTATION

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