Keck Seng (Malaysia) Berhad (8157-D)
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KECK SENG (MALAYSIA) BERHAD (8157-D) A N N U A L R E P O R T 2018 L A P O R A N T A H U N A N KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T C O N T E N T S Page About Keck Seng Malaysia 2 Group Overview 3 Financial Highlights 4 Chairman's Statement 5 Management Discussion And Analysis 6 - 7 Corporate Information 8 Directors' Profile 9 - 18 Key Senior Management’s Profile 19 - 25 Corporate Governance Overview Statement 26 - 45 Audit Committee Report 46 - 50 Statement On Risk Management And Internal Control 51 - 53 Sustainability Statement 54 - 70 Directors' Report 71 - 74 Statement By Directors 75 Statutory Declaration 75 Independent Auditors' Report 76 - 79 Statements Of Comprehensive Income 80 - 81 Consolidated Statement Of Financial Position 82 - 83 Company Statement Of Financial Position 84 - 85 Consolidated Statement Of Changes In Equity 86 - 87 Company Statement Of Changes In Equity 88 - 89 Statements Of Cash Flows 90 - 91 Notes To The Financial Statements 92 - 190 Analysis Of Shareholdings 191 - 193 Particulars Of Group Properties 194 - 195 Notice Of Annual General Meeting 196 - 201 Form of Proxy Enclosed 1 KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T ABOUT KECK SENG MALAYSIA Keck Seng (Malaysia) Berhad (“Keck Seng Malaysia”) traces its history back to 1943 when Mr Ho Yeow Koon co-founded a small trading business in Singapore which he subsequently expanded to Malaysia. He bought land in Masai, Johor, and ventured into rubber planting in 1959, followed by oil palm cultivation in 1965. The plantation was the beginning of Keck Seng Malaysia, which was publicly listed on 26 May 1977. Over the years, we have grown to a diversified group with business operations extending from plantations to hotels, golf resort, property development and investment. Our Vision s4OBUILDADIVERSIlEDCORPORATION s4OPROVIDESUSTAINABLELONGTERMGROWTHANDVALUETOSHAREHOLDERS Our Values We value our people as our strength, and will retain and develop our human capital through our core values of: sINTEGRITYsCOMMITMENTsDILIGENCEsCOSTEFlCIENCYsINNOVATION Our Community We believe in contributing to and growing together with our communities, and will continue to engage in socially beneficial activities. 2 KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T GROUP OVERVIEW Keck Seng Malaysia has three core businesses: Plantations and Manufacturing We are an integrated player with oil palm plantations, mill, refinery and manufacturing operations based in Johor, Malaysia. Property Development and Investment We are a property developer focusing in Johor, Malaysia. Our projects include: Projects Location Tenure Development Area Bandar Baru Kangkar Pulai 27 km Pontian Road immediately after Freehold/Leasehold 2,053,588 sqm Kangkar Pulai Village. Tanjong Puteri Resort 35 km south-east of Johor Bahru. Freehold 2,417,996 sqm Adjacent to Pasir Gudang Industrial Estate. Taman Daya 13 km north-east of Johor Bahru, Freehold 149,948 sqm (near Kampong Baru, Kangkar Tebrau). We are also involved in property investment. Our key investments include: Buildings Location Tenure Floor Area Description Menara Keck Seng 203 Jalan Bukit Bintang, 55100 Kuala Lumpur. Freehold 24,538 sqm Office Regency Tower 8, Jalan Ceylon, 50200 Kuala Lumpur. Freehold 20,178 sqm Condominium Hotels and Resort We own hotels in North America and operate a golf resort in Malaysia. Hotels Location Tenure Buildup Area Description DoubleTree by 1956, Ala Moana, Boulevard, Honolulu, Freehold 18,525 sqm 18 storey hotel Hilton Alana - Hawaii, 96815, USA. with 317 rooms Waikiki Beach and an adjoining 7 storey office building SpringHill Suites 25, West 37th Street, New York, Freehold 6,624 sqm 19 storey hotel New York NY, 10018, USA. with 173 rooms Midtown Manhattan Delta Hotels by 655 Dixon Road, Toronto, Ontario Canada, Freehold 52,954 sqm 12 storey hotel Marriott Toronto M9W 113. with 433 rooms Airport and Conference Centre Resort Location Tenure Land Area Description Tanjong Puteri Golf 35 km south-east of Johor Bahru. Freehold 208 hectares 54 holes golf Resort Adjacent to Pasir Gudang Industrial course, clubs and Estate. other recreational facilities 3 KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T FINANCIAL HIGHLIGHTS FINANCIAL HIGHLIGHTS (RM’000) 2014 2015 2016 2017 2018 (Restated) (Restated) (Restated) Revenue by business segments: Plantations and Manufacturing 730,751 604,866 687,862 831,579 590,854 Property Development and Investment 182,671 121,628 116,622 108,417 115,065 Hotels and Resort 166,080 223,976 237,219 239,708 250,152 Share Investment Holding 7,021 7,689 7,524 9,553 11,206 Total revenue 1,086,523 958,159 1,049,227 1,189,257 967,277 Profit before tax 166,446 113,632 154,955 31,008 69,521 Profit net of tax 128,581 104,341 128,101 23,042 39,169 Profit net of tax attributable to owners of the parent 129,719 101,978 124,291 22,876 36,472 Earnings per share (sen) 36 28 35 6 10 Dividends per share (sen) 10 10 10 10 10 Equity attributable to owners of the parent 2,034,072 2,106,787 2,213,702 2,380,960 2,244,108 Total assets 2,567,213 2,765,304 2,860,983 2,920,093 2,775,528 Loans and borrowings 263,272 300,685 293,031 250,992 232,090 Revenue and Profit (RM million) Total Assets and Equity (RM million) 1,500 200 3,500 2,500 150 3,000 1,000 100 2,500 2,000 50 2,000 500 0 1,500 1,500 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Revenue (Left Hand Side) Total assets (Left Hand Side) Profit attributable to owners of the parent Equity attributable to owners of the parent (Right Hand Side) (Right Hand Side) Share Price (RM) 2014 2015 2016 2017 2018 Highest daily close 7.44 5.94 5.67 5.18 4.92 Lowest daily close 5.06 4.42 4.69 4.55 3.92 Year-end closing 5.26 5.40 4.73 4.60 4.08 4 KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T CHAIRMAN’S STATEMENT Dear Shareholders, 2018 will be remembered as the year where a trade war between America and China broke out. Protectionist measures announced by the Trump administration and retaliatory measures by China took a toll on global trade and investment. Malaysia was not spared with GDP growth slowing from 5.9% in 2017 to 4.7% in 2018. Performance We had made progress in restoring the profitability of business units through various initiatives. As a result, profit before tax more than doubled from RM31 million in 2017 to RM69.5 million in 2018. We will continue to pursue efforts to further improve operational efficiency and cost reduction. Outlook and Strategy There is growing evidence that the global economy has decelerated since the start of 2019. Due to the impact from the lingering US-China trade tension, the risk of a synchronised slowdown in global growth is looming. As a result, the US Federal Reserve has decided to pause in its campaign of steadily hiking interest rates, and China is attempting to support its economy with tax cuts and infrastructural spending. Until there is greater clarity for us to form an opinion on where the economy is going, the best strategy is to adopt a prudent approach to investment. As an example, we joined a group of international investors and invested EUR23 million (or RM 108 million equivalent) in AccorInvest Group S.A. ('AccorInvest') last year. The transaction was completed at the end of May 2018. AccorInvest has a portfolio of more than 800 hotels with the majority located in Europe. Europe is an attractive destination for international tourists and AccorInvest is positioned to capture the future growth of its underlying market. This investment hence enables us to gain exposure to AccorInvest’s large and well-diversified portfolio with resilient cash flows. Dividends Our strong financial position has enabled us to reward shareholders with consistent dividends in spite of the uncertain economic outlook. We declared total dividend of 10 sen per share for financial year 2017. The Board will be recommending a final dividend of 6 sen per share for shareholders’ approval during the coming Annual General Meeting. Together with 4 sen interim dividend declared last August, we will pay out almost all of 2018 earnings to shareholders. Acknowledgement I wish to thank our employees and fellow directors and for their tireless effort and commitment in this challenging environment. I would also like to express my sincere appreciation to all our shareholders, business partners and stakeholders for their support. Ho Kim Swee @ Ho Kian Guan Chairman 5 April 2019 5 KECK SENG (MALAYSIA) BERHAD (8157-D) L A P O R A N T A H U N A N 2018 A N N U A L R E P O R T MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL REVIEW Revenue in 2018 decreased by 19% to RM967.3 million as compared with 2017, mainly due to lower selling price and quantity of refined oil sold.