The lower construction revenue came on the back of less construction work done, as a result of differences in stages of its various construction contracts.
This was further exacerbated by lower revenue recognised from the property development business, which was attributed to timing of revenue recognition. With regards to this, Tiong Seng highlights that although $57.3 million of gross development value of units in Equinox and Tranquility Residences were sold over the quarter as at end-March, this has yet to be recognised as revenue due to its revenue recognition policy.
In line with the lower construction activity, costs of construction fell 16% to $118.7 million from $141.1 million.
Costs of sales of development properties fell 43% to $7.4 million from $12.9 million a year ago.
Finance costs fell 79% to $0.7 million from $3.2 million a year ago on lower finance expenses, due mainly to an exchange gain compared to an exchange loss in 1Q17 due to exchange differences in RMB compared to the SGD.
Notably, gross profit margin for 1Q18 grew to 10% from 3.9% a year ago, which Tiong Seng attributes to a difference in projects’ profile and relative weighted average profitability in its projects recognised over the two comparative periods.
As at March 31, the group’s construction order book stands at approximately $491 million, and is expected to extend till year 2020.
In view of proposed inflows of government infrastructure projects and private sector construction demand, Tiong Seng says it sees “greener pastures” for the constructions sector as the year progresses into the remainder of 2018.
Despite the bullish property market, the group notes that the market has also displayed signs of fatigue in addition to increasing pricing strategies of developers, which may in turn translate to lower upward pressure on final selling prices when projects are launched going forward.
“Moving forward into the remainder of 2018, we adopt a cautiously optimistic stance as we anticipate a spike in construction demand that is projected to come into play towards the second half of the year. Leveraging on our broad spectrum of construction capabilities, we are confident that our innovative methods will place us in an advantageous position to secure both private and public sector projects slated to roll out,” says Pek Lian Guan, CEO of Tiong Seng.
Shares in Tiong Seng closed 1.3% higher at 40 cents on Monday.
