King Wan six month profit up 184% to S$12.8mln

The group maintains S$143mln order book, of which, S$28.9mln worth of contracts were secured in second quarter FY2011.

Continuing its earnings momentum of the past few quarters, mainboard-listed King Wan Corporation Limited (“King Wan” or “the Group”) on Tuesday released its results for fiscal year 2011 for the six months ended 30 September 2010, recording 184% higher net profit attributable to shareholders of S$12.8 million compared to the S$4.5 million in the previous corresponding period, according to a King Wan report.

In appreciation of shareholders’ support, the Board of Directors has recommended a one-tier tax exempt first interim dividend of 0.5 Singapore cent per ordinary share, which works out to a dividend payout ratio of 14% based on first half FY2011 profits.

For the half year ended 30 September 2010, revenues also improved, expanding 8% to S$31.7 million from S$29.3 million registered a year ago. The Group attributed the higher turnover to the good progress made on ongoing Mechanical & Electrical (“M&E”) contracts. The M&E segment continued to account for the greater part of turnover.

Profit before income tax went up by 180% to S$13.4 million over the S$4.8 million it recorded in the previous equivalent period. Key reasons for this were higher profit contributions from its core M&E business arising from more ongoing contracts, gains on disposal of an associate (Cables International Pte Ltd) which added S$4.3 million to the Group’s profits, and substantially higher contributions from its associates.

Quarter-on-quarter, the Group recorded 266% higher net profit attributable to shareholders of S$6.8 million compared to the S$1.9 million in the previous corresponding period. Its revenues also increased, standing at S$22.8 million relative to S$14.4 million, up 58%. Along with higher revenues for the quarter, gross profit was S$3.8 million against S$1.2 million a year ago, up 221%. Ongoing M&E contracts on hand also derived improved margins for the second quarter ended 30 September 2010, reflecting a stronger recovery in the construction industry.

Earnings per share for 1H2011 grew 185% to 3.67 Singapore cents, from 1.29 Singapore cents previously, due to the higher net profits.

Ms Chua Eng Eng, Managing Director of King Wan said: “We are very encouraged by our solid performance in the second quarter of fiscal year 2011, with considerable growth in revenues and earnings. Our results this quarter exceeded the previous quarter’s performance in almost every area – revenue, gross margin, operating income, net income and cash generation, underlining the strength and sustainability of our business model.”

King Wan is an integrated building services company with principal activities in the provision of M&E engineering services for the building and construction industry. It also operates in three other business segments, namely Property, Manufacturing and Services.

Sustained performance in associates
20%-owned associate in Thailand, Environment Pulp & Paper Co., Ltd (EPPCO), that manufactures pulp from sugarcane bagasse, swelled the Group’s bottom line by S$3.7 million, a significant improvement of 351% over the S$0.8 million in the corresponding period a year earlier; the reason being it was able to fetch higher prices for its bagasse pulp and reduced cost of production.

Meadows Bright Development Pte Ltd, its 35%-owned associate in property development, enhanced Group results by 124%, contributing S$2.5 million in relation to S$1.1 million a year ago.

The remaining associates also maintained their contributions to the Group’s results for the half year ended 30 September 2010.

Strong balance sheet
The Group’s balance sheet continues to be healthy, contributing to a strong financial base. Cash and cash equivalents were a good S$20.4 million for the six months ended 30 September 2010, relative to S$2.0 million as at 30 September 2009, up 937%. Net working capital improved 69% to S$26.8 million vis-à-vis S$15.8 million a year ago.

Assets totalled S$110.1 million and net assets came to S$81.6 million representing a net asset value of 23.37 Singapore cents per share.

Its market capitalisation amounted to S$69.8 million, derived from the closing price of S$0.20 as at 9 November 2010.

Positive outlook
“Going forward, we will continue to work hard to deliver good value to our clients, and a strong financial performance to shareholders,” added Ms Chua.

The Group’s order book to date is healthy, standing at approximately S$143 million based on firm M&E engineering contracts, with projects with different completion and delivery timeframes lasting up to 2013. Of these, S$28.9 million worth of contracts were secured in 2Q2011.