This article first appeared in City & Country, The Edge Malaysia Weekly on November 7, 2022 - November 13, 2022

It is an exciting time,” says Southern Score Sdn Bhd CEO Gan Yee Hin as he shares the inner workings of contracting jobs at the group’s HQ in Setapak, Kuala Lumpur. Southern Score, which is scheduled to go for its initial public offering (IPO) on Nov 9, is 100%-owned by investment holding company Southern Score Builders Bhd.

“We recorded net profits of RM6.51 million, RM19.20 million and RM35.18 million in the financial years ended Dec 31, 2019, 2020 and 2021 respectively. We are hopeful that we will follow this trend moving forward, and everything is on track,” Yee Hin remarks.

Southern Score provides professional project management services, from project initiation stages to the completion of construction works. “These services encompass project initiation, planning and design, appointment of subcontractors, procurement, construction project management as well as inspection and completion handover,” says Yee Hin.

Poised to lead the family business — his father Tan Sri Gan Yu Chai founded the company in 2012 — he oversees the planning and implementation of construction projects. He was appointed to the Southern Score board on Aug 1, 2019.

Yee Hin graduated with a Master of Engineering (civil and structural) from the University of Sheffield in the UK in 2015.

“For our services, we are targeting a niche market of landowners, pocket landowners and opportunities with the government to look for affordable housing projects. With our property development background, we have built quite a few affordable, PR1MA projects.”

Yee Hin is also responsible for formulating business strategies that contributed to Southern Score’s business growth. “We are principally involved in the provision of construction management services mainly in Kuala Lumpur.”

Southern Score, a CIDB Grade 7 contractor, has completed several projects, including PR1MA Jalan Jubilee.

Southern Score was acquired by G Neptune Bhd — as part of the latter’s regularisation plan — from Super Advantage Property Sdn Bhd, which is owned by Yu Chai.

“The reverse takeover (RTO) is integral to regularising G Neptune’s listing status as it allows the company, renamed Southern Score Builders Bhd, to enter the construction industry where a recovery in demand in the residential subsector of the construction sector will benefit it.”

G Neptune was previously known as GPRO Technologies Bhd and was listed on the MESDAQ Market of Bursa Malaysia Securities Bhd on June 2, 2004.

Yee Hin shares Southern Score’s plans in the coming months. “Our plans include injecting funds into TCS SS Precast Construction Sdn Bhd (TSPC) as we intend to grow the manufacturing of Industrialised Building System (IBS) products as an additional revenue stream for the company. This is also to leverage on the increasing adoption of sustainable practices in the construction sector.

“We intend to leverage on the listing status to grow the construction business, which is on a rebound with the recovery of the economy,” he adds.

“Similarly, large civil infrastructure projects will benefit this subsector with positive spillover effects through connectivity,” says Yee Hin.

At Southern Score, there is also a cumulative net profit guarantee of RM80 million from the financial year ending Dec 31, 2022 (FY2022) to FY2024 supported by an order book amounting to RM528 million. “We have had strong financial performance with positive operating cash flow in the past few years with zero borrowings,” explains Yee Hin.

“Operationally, we have an asset-light model enabling us to scale up while remaining flexible with the cost structure as we do not hold any land, so we have lower exposure to cyclicality and house prices. In addition, outsourcing all construction work to subcontractors, who also supply the machinery, helps us to adapt costs to changes in the order book as this would make the cost base more rigid,” he says. “We intend to grow the manufacture of IBS products through TSPC to leverage on the construction sector’s adoption of sustainable practices.”

“All in all, I think our stakeholders are receptive. It is after all an expansion plan. Our stakeholders would like to continue to grow, to generate a different source of revenue and to be able to adapt to the market. We hope that there would also be more collaboration and opportunities with the government for the affordable housing projects, among other construction projects.”

Yee Hin is adopting some measures to mitigate the current challenges in the industry. “Labour issues and [material] costs are the main obstacles affecting the industry. At our end, having an asset-light model does help us to manage costs, especially in times of rising prices.

“To mitigate risks over the longer term due to the rising prices, we have taken measures to secure construction material as well as machinery and equipment. This strategy is not new to us as we started with the Vista Harmoni Residences project, where we either purchased construction material and machinery and equipment, or rented these machinery and equipment,” he says.

The group also purchases materials in bulk, Yee Hin says. “We maintain our cost efficiencies through bulk procurement of selected construction materials at optimal pricing (that is, when prices are favourable). By acquiring or renting machinery and equipment, we can assist subcontractors and mitigate the risk of there being shortages. This will also allow us to better manage our subcontractor cost while machinery and equipment that are not utilised can be leased out, an option we are exploring.”

According to him, the group intends to grow the manufacture of IBS products as another revenue stream. “Our business model for construction works also relies on IBS products as it is efficient and standardised, which helps in scaling up the business as well as managing costs effectively.”

“For upcoming projects, we have a letter of intent from a property developer for the provision of construction services while we have pending one project at the tender stage from a land bank owner. These are mainly for affordable housing projects located in the Klang Valley, with a total contract sum of RM634.3 million.

“As for ongoing projects, we have Platinum Arena Residences, which has a contract sum of RM199.11 million; Vista Wirajaya 1 @ PV9 Residences with a contract sum of RM308.68 million; Vista Sentul Residences with a contract sum of RM149.57 million and; Vista Harmoni Residences with contract sum of RM131.4 million,” says Yee Hin.

“With economic activities regaining momentum, we expect growth in the construction sector to also rebound in 2022, supported by ongoing construction activities from large civil infrastructure projects.”

Yee Hin opines that a more stable employment market will also support the residential subsector that will benefit from new housing projects and launches while growth in the non-residential subsector is expected to be supported by “both existing and new commercial as well as industrial projects”.

An independent market research report attached to the shareholders’ circular also noted that residential construction activities are expected to recover over the long term with the value of awarded residential construction projects to rise from RM27.2 billion in 2021 to RM32.2 billion in 2025 at a compound annual growth rate of 4.3%.

“Growth in the affordable housing segment is expected to bounce back faster than mid-tier and luxury residential segments, while office and retail segments are expected to witness a slower recovery over the forecast period,” notes Yee Hin.

Moving forward, infrastructure construction is also expected to maintain growth momentum, supported by public spending. “We will be kept busy implementing what we have disclosed under the RTO, which includes injection of funds to TSPC, purchase of building materials, repayment of contractors, acquisition, or rental of construction assets as well as acquisition of an office. This will take place over a period of 12 to 18 months.

“In the meantime, given the rebound in construction activities and increase in new residential launches, we will be busy tendering for projects to add to our order book,” Yee Hin concludes.

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