Hor Kew (SGX: BBP) reported its 2025 full year results on 27 Feb (After Trading Hours)
I figured that i should release this post before trading reopens on 2 March to give some insights to how i go about thinking about the results.
On first glance, it definitely looks bad as revenue fell, gross profit margin fell, total profit fell and the company is unprofitable if receivables gain and other income is excluded.
I did a deep dive on its results breakdown and looked at the results at least a good 3 times to think about whether i should be selling out from this position.
If you are interested to see how i attempt to deep dive , do read on.
1) Finding out if the items on the balance sheet are likely recurrent or one-offs.
From the above, we try to find out what the likely profit excluding one-offs will be. Items like rental income are kept in the calculation while others like the gain on trade receivables , and other income portions are excluded. It is worth noting depreciation has increased which would eat into margins.
Bad Debts and Restoration Cost are excluded in the calculation as they are one-offs
Lastly, we estimate some increase in depreciation and finance cost due to the increased borrowings from 37.8m to 86.8m and PPE from 32.2m to 91.1m
Summing all up, we have the valuations below
We assumed that the revenue and poorer margins will continue. At current price of 1.31, this is a PE of 12 and PB of 0.72
What can alter the results negatively
1) Increased Restoration Cost. Any potential increase in restoration cost incurred in 1H 2026 will eat into profits
2) Increased Depreciation and Finance Cost. Although there is 300 000 and 200 000 allocated to the already increased depreciation and Finance cost, the increase might not be fully reflected yet. Have to wait till the annual report to know the terms of the loan and lease / machinery depreciation
3)
Increased Competition leading to even poorer margins. This part is probably difficult to monitor.
What can alter the results positively
1) Inventory at an all time high since Covid.
I have not checked pre-covid 2018 and before inventory but post covid, it is at its highest.
End of 2025 Inventory of 16.1m is 70% higher than 1H 25 and generally, in the following half year result after a higher inventory, results are better apart from Covid 2020.
Could this signal a significantly higher revenue ahead?
2) Sale of Malaysia Land.
Estimated at 200rm-250rm (65m to 81m), currently 18 million sgd on the books. The recent increase in borrowings might accelerate the sale of the idle land that has been in the books since 2010s.
3)
Commentary on Outlook remains positive.The commentary for FY 2025 is the same as FY 2024. But in 2025, revenue fell.....so yeah
Food for Thought
This post came out in a search when i was looking at the new lease at Kaki Bukit Road 6.
Seems like Hor Kew is the new operator and joins the 6 ICPH List.
My thought is that the company is going through a change-over phrase. The decision to occupy an ICPH when 2 other previous operators have failed and been vacant for 2 years (despite the construction boom) is really a bold move.
They could have settled for lesser
I wonder if the lease is 30 years and if any grants been given for this as it is a high upfront cost. The 60m spent is actually cheaper than its peers currently. They might have got a good deal as they do not have to take out everything and rebuild it from scratch.....but the fact its vacant for 2 years has to ring bells to why no one would take it when 'construction boom' is happening.
To refer to a listed peer who has precast operations in SG (ICPH) and MY, it would be Soilbuild which is looking to spin-off its segment.
2H 25 Segment Result Margin for Soilbuild
Singapore: 12.65%
Malaysia: 11.68%
Hor Kew: 17.82%
Conclusion
This is a real cross roads actually. ICPHs have traditionally not done well and have poorer margins.
The increased inventory and a lower cost ICPH entry along with decent commentary might paint some positive light on results moving forwards.
Along with the future listing of Soilbuild Precast, it might give everyone a valuation uplift and shed more light on the industry outlook currently.
The result is not great and the dividend cut (which is justified given that they have exceeded their 30% debt to asset ratio that they intend to target.)
Along with ICPHs tend to have lower margins.
When it comes to whether i would sell, i believe opportunity cost (which i am seriously bad at) and the post result reactions.
There is probably 3 phrases to think about selling. When markets reopen, When Annual Report is out and AGM is over, When 1H 2026 results is released
Any buying will only be after the AGM minimally for now unless any research report is released.
If it drops too much on reopen, it makes no sense to sell as the analysis has shown that core earnings are positive and there is some positive factors. If they announce the sale of land in the next few months or they guide for good revenue and improvement in margins at the AGM, it would look bad to realise these losses due to knee jerk reactions
Of course, there is every chance the AGM mood is bad and outlook is bad, entering ICPH is the only solution left and 1H 26 is bad. Then selling on open would have looked so much better then.
If it does not drop on re-open, without listening to the management's view during AGM, it remains a story that is made based on the above findings.
I believe it will fall on open as dividend cut and profit drop is never good news to investors. Based on the positives above, if it falls too much, it makes no sense to sell. But if it does not fall a lot, it might make some sense to sell a portion to allocate to other stocks and review again after AGM.
Selling all is currently not on my mind after the analysis. Because of the deep value (Msia Land), possible increase in production capacity (New ICPH), 70% increase in Inventory (played the most part in the decision).
