[SINGAPORE] Construction and property group Koh Brothers is set to usher in a new era of growth, as Singapore embarks on large-scale infrastructure upgrades over the next few years.
“We were there with Singapore in its earlier phases of nation-building – and now we’re going through nation-building 2.0,” said group chief executive officer and executive chairman Francis Koh.
He was speaking to The Business Times fresh off the group’s latest win: a S$999 million contract awarded by Changi Airport for the construction of underground tunnels at the upcoming Terminal 5.
The contract was nabbed by a joint venture between Koh Brothers Building and Civil Engineering Contractor – a unit under the group’s subsidiary Koh Brothers Eco Engineering – and Japanese company Penta-Ocean Construction.
With the new project, Koh noted that the group’s order book now exceeds S$1 billion with visibility to 2029.
Things have certainly been rosier for the group.
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After sustaining one-and-a-half years of pandemic-induced losses, Koh Brothers finally returned to the black with a net profit of S$1.7 million for its latest half-year ended Dec 31, 2024. It had posted a net loss of S$5.9 million the year before.
This was despite revenue sliding 21 per cent to S$125.5 million in H2 2024, from S$159.7 million. Koh attributed the turnaround to reduced construction losses, improved profits from associate company Oiltek International, and the group’s real estate segment turning profitable.
Shares of Koh Brothers closed at S$0.187 last Friday (Jun 27), putting the company’s market capitalisation at S$77.1 million.
Growing with Singapore
Key growth drivers for the group will come from the construction of Changi Airport Terminal 5 and the expansion of Marina Bay Sands – both of which are likely to be sources of “very big” contracts in the near-term, said Koh.
As he sees it, the group’s strong track record in public-sector construction projects puts it in good stead to bag these tenders.
Koh Brothers will also continue its standard slate of government projects, including public housing developments, the expansion of MRT networks, and wastewater treatment.
According to the Building and Construction Authority, construction contracts worth up to S$53 billion are expected to be awarded this year. From 2026 to 2029, total construction demand is projected to reach an average of between S$39 billion and S$46 billion each year.
Koh Brothers has grown alongside Singapore through the ages, literally. It was, after all, founded by Koh’s father – Koh Tiat Meng – in 1966, just a year after the Republic gained independence.
Since then, the group has been responsible for laying much of the groundwork that has transformed the Republic into a first-world metropolis over the past six decades.
Its major projects include the construction of Marina Barrage, Punggol Waterway, water reclamation plants at Changi and Jurong, as well as Downtown Line 1 Bugis Station and its associated tunnels.
Amid booming construction activity, Koh is confident that the group will remain profitable in FY2025 – and perhaps even surpass both top and bottom line numbers from FY2024.
Koh is already eyeing future growth opportunities. One key project is the upcoming “Long Island” reclamation along Singapore’s east coast, which will require ground improvement works and also water treatment for the creation of a freshwater reservoir.
He expects tenders to start coming in from 2030 onwards, once feasibility studies conclude.
Diversification within its niche
Some shareholders have raised concerns that the group’s portfolio is not diversified enough, given the heavy concentration of revenue from construction and building materials.
This segment contributed nearly 95 per cent of total revenue for FY2024, up from 68.8 per cent the year before. The rest came from real estate and leisure, as well as hospitality.
But those who take that view lack “a clear picture” of the business, said Koh, pointing out that there are many sub-segments.
For instance, the construction division alone consists of three separate business units: infrastructure piling and foundation works; building construction; as well as water and wastewater treatment.
They were previously lumped together as one, before being carved out during an internal operational streamlining in late 2024.
The group has also branched out into bio-refinery and renewable energy projects through Oiltek International, which is a subsidiary of Koh Brothers Eco Engineering.
Koh is ramping up hiring at the building construction unit, as he aims to bid for more private commercial and residential construction contracts down the road. There are plans to increase the unit’s headcount to 80 by 2027, from eight employees currently.
“We’ve always been traditionally perceived as being strong in foundation works, but not so much in (the actual construction of) buildings,” he explained. “But as a construction company, we should be strong in both areas.”
He also has a bigger ambition: to nurture more “engineer-preneurs” – a portmanteau he coined to refer to engineers turned entrepreneurs – and give them the opportunity to lead some of the group’s subsidiaries one day.
This plan is already in motion, with the carving-out of distinct business units within the construction segment.
Koh wants to reward the group’s talent by putting high-potential engineers in charge of these units and empowering them to grow the businesses into subsidiaries. These entities can be potentially spun off for future listings “when the time is right”, he said.
Oiltek went on a similar trajectory, as an 80-per-cent-held indirect subsidiary of Koh Brothers Eco Engineering. It was spun off to list on the Singapore Exchange’s Catalist board in 2022, before transferring to the mainboard in April 2025.
Engineering talent will remain crucial to Singapore, as the Republic continues to embark on infrastructural developments, Koh noted.
“We want to encourage our engineering talent – whether civil engineers, wastewater treatment engineers, or processing engineers – to go on an entrepreneurial path,” he said.
“The idea is for them to helm our business units, grow them into companies, and expand from there… They can be more independent, raise funds by themselves, or do joint ventures.”
Challenging real estate environment
As the group beefs up its construction and building materials capabilities, its real estate investments have taken a backseat.
This is in view of the higher-interest-rate environment, said Koh, noting that government cooling measures have also affected the take-up rates for properties in Singapore.
As part of risk management efforts, he has sought to actively reduce the group’s bank borrowings.
Koh Brothers’ total bank borrowings and lease liabilities fell to S$145.7 million in FY2024 from S$217.7 million the year before. Its gearing ratio stood at 0.37 as at end-2024, down from 0.54.
Still, shareholders have raised concerns over the lack of ongoing property developments by the group of late, following the completion and sale of Van Holland and Hyll on Holland in H1 2024.
In light of this, the real estate segment’s revenue contribution plunged to 4.4 per cent in FY2024, from 30.1 per cent in FY2023.
Koh Brothers still receives recurring income from four investment properties at home and abroad. These are serviced apartment Alocassia, mixed-use development Sun Plaza, First City Complex in Batam, and Nonhyeon I’Park in Seoul.
Given the currently high capital values, some shareholders have suggested the group sell its stake in Sun Plaza – a move Koh is not ruling out. “If the price is good, we will think about how to unlock shareholder value,” he said.
The group will adopt a prudent approach in seeking out future real estate opportunities, he added, flagging projects in the Johor-Singapore Special Economic Zone as possibilities.
Within the zone, the group has fingers on the upcoming mixed-use development Medini i-Walk. It has formed a joint venture vehicle in Malaysia – of which it owns a 25 per cent equity stake – with partner Dennis Chiu to undertake the project.
Koh pointed out the group holds a competitive advantage in the form of a precast concrete facility in Senai that it owns, under the G&W Group of companies – the building materials division of Koh Brothers. This will allow it to directly supply precast concrete components to Medini i-Walk.
Meanwhile, the group’s leisure and hospitality segment is likely to remain status quo for now.
It has just one asset under this segment: the 130-room Oxford Hotel on Queen Street. Its operations contributed 1.5 per cent of group revenue for FY2024, roughly on par with FY2023’s 1.1 per cent.
The group intends to prioritise the growth of its construction and real estate businesses over this, said Koh.
This is because hotels require a higher capital outlay, with returns on investments often taking longer to materialise than those of residential projects.
Nonetheless, Koh Brothers is considering asset enhancement initiatives for Oxford Hotel – its poor ratings on hotel booking websites have been flagged by shareholders.
“We take all these opinions very seriously and will see how we can improve,” Koh said.
