How Keong Hong Navigated the Construction “Death Zone” to Reclaim Profitability

Introduction: The Construction Industry’s Great Rebound

The post-pandemic era has been a “death zone” for many in the construction sector. Global supply chain disruptions, soaring material costs, and severe labor shortages created a perfect storm that sank several established players. For Singapore-based Keong Hong Holdings, this “difficult period” was defined by the crushing weight of high-cost, pre-pandemic contracts that threatened to erode the Group’s long-term stability.

However, the Group’s FY2025 results signal a dramatic change in course. Far from a mere statistical recovery, Keong Hong has emerged as a compelling case study in corporate resilience. By pivoting from deep losses back to the black, the company has shown that a disciplined blend of operational overhauls, balance sheet cleaning, and technological adoption can navigate even the most turbulent market cycles.

The S$14 Million Swing: Beyond the Productivity Narrative

The headline of Keong Hong’s fiscal year 2025 is a massive financial reversal. In FY2024, the Group was reeling from a net loss of S3.9 million**. Fast-forward twelve months, and that figure has transformed into a robust **net profit of S10.2 million.

While the top-line revenue grew by a modest **5.7% to S182.4 million**, the real story lies in the recovery of margins. The Group pivoted from a gross loss of S5.4 million to a gross profit of S13.3 million**. However, a sophisticated analysis reveals that this turnaround wasn’t solely built on brick and mortar. A significant **S4.9 million of this swing was driven by a “reversal of loss allowance on financial assets.” This non-operational gain, while crucial for the bottom line, reminds investors that the recovery is as much about accounting stabilization and asset recovery as it is about construction efficiency.

The Counter-Intuitive Boost: Finding Profit in Project Completion

In a high-inflation environment, finishing legacy projects is typically a cash drain. These “pre-pandemic” contracts often act as anchors, dragging down margins because they were priced before the global spike in costs. Yet, for Keong Hong, the final stages of these projects became the catalyst for recovery.

By reaching the near completion of these legacy projects and implementing “improved construction productivity,” the Group successfully stabilized its cost base. This allowed gross profit margins to stage a massive leap from -3.1% in FY2024 to 7.3% in FY2025. This suggests the company has finally flushed the “toxic” low-margin contracts out of its system.

“The outlook for the medium-term looks promising… And the most difficult period for Keong Hong is now behind us, the future of Keong Hong will be on diversified growth, with building construction as our core business, we are aiming to build new engines of growth should there be opportunities.” — Mr. Owen Xu, Interim CEO

Trimming the Fat: Currency Tailwinds and Cost Discipline

While construction sites were becoming more efficient, the corporate office underwent a significant lean-down. Keong Hong reported a staggering 46.5% reduction in administrative expenses, which dropped from S18.3 million to **S9.8 million**.

This internal streamlining was bolstered by a favorable currency environment. Unlike the previous year, which was marred by foreign exchange losses, FY2025 saw the Group benefit from a net foreign exchange gain resulting from the appreciation of the United States Dollar against the Singapore Dollar. Coupled with lower depreciation of property, plant, and equipment, and a 26% reduction in finance costs (due to lower borrowings), the Group’s internal efficiency acted as the “silent hero” of the turnaround.

Cleaning the Books: Resolving the “Qualified Opinion”

A critical milestone in Keong Hong’s recovery was the resolution of the “qualified opinion” that clouded its FY2024 financial statements. For a listed entity, an audit qualification is a red flag that can hamper investor confidence and creditworthiness.

Keong Hong addressed this head-on by completing the disposal of its investment in Katong Holdings Pte. Ltd. on June 30, 2025. This move effectively resolved the audit qualification concerning the equity accounting of that investment. By disposing of this associate, the Group not only simplified its balance sheet but also signaled to the market that it is serious about institutional transparency and moving past legacy complications.

High-Tech Hard Hats: Vying for High-Value Projects

To remain competitive in Singapore’s increasingly technical landscape, Keong Hong is moving beyond traditional building methods. The Group is leveraging technology to vie for “high value-added projects” that offer superior returns:

• Design for Manufacturing and Assembly (DfMA): Off-site construction to reduce site labor.
• Prefabricated Prefinished Volumetric Construction (PPVC): Enhancing speed and quality control.
• The “Digit-alpha” Program: A pioneer pilot utilizing Virtual Reality (VR) for capability transformation and staff training.

These adoptions are essential defensive and offensive tools, allowing the Group to mitigate labor risks while increasing the precision required for complex modern developments.

The Maldives Paradox: Navigating a Global Tourism Surge

The Group’s hospitality segment in the Maldives presents a curious strategic challenge. In 2025, the Maldives welcomed a record 2.2 million international visitors—a 9.8% increase—driven by strong demand from China, Russia, the UK, Germany, and Italy.

However, Keong Hong’s resorts (Mercure Maldives Kooddoo and Pullman Maldives Maamutaa) reported a combined average occupancy of 49.6%, trailing the industry average of 58.3%. This delta indicates that while the macro-environment is thriving, there is an operational gap to bridge. The Group has indicated it is now exploring targeted marketing and operational measures to better capture the influx of high-spending international travelers.

Cash Over Coupons: Why No Dividends is a Sign of Focus

Investors might look at the S$10.2 million net profit and wonder why the Board of Directors chose not to propose a dividend for FY2025. In the context of a capital-intensive turnaround, this is a sign of strategic maturity.

With a cash position of S$26.8 million, the Group’s priority is clear: conserving capital for “working capital requirements” and funding its “new engines of growth.” By forgoing a payout today, Keong Hong is ensuring it has the liquidity to bid on the massive public and private sector projects on the horizon, rather than starving its core operations for short-term sentiment.

Conclusion: Building for 2026 and Beyond

The foundation for Keong Hong’s “second act” appears solid. Singapore’s construction demand remains robust, with an annual average of S39 billion to S46 billion projected per year from 2027 to 2030. Massive public works, including the Changi Airport Terminal 5, the Marina Bay Sands expansion, and the redevelopment of NUH at Kent Ridge, provide a fertile ground for growth.

With an approximate order book of S$203 million and ongoing work on projects like Solitaire on Cecil and Tengah Plantation, Keong Hong has navigated its way out of the “death zone.” As the Group pivots toward diversified growth, a final question remains: Is the path forward more dependent on these massive external infrastructure projects, or on the Group’s continued internal grit to maintain a lean, tech-driven operation? For Keong Hong, the answer is clearly both.

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