Sin Heng Heavy Machinery Limited

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Message to Shareholders
Extracted from Annual Report 2021

Dear Shareholders,

On behalf of the Board of Directors, we are pleased to present to you the annual report of Sin Heng Heavy Machinery Limited and its subsidiaries (the "Group"), for the financial year ended 31 December 2021 ("FY2021").

Outlook and Key Events

With the worst of the COVID-19 pandemic likely behind us, FY2021 was a year of recovery, both operationally and financially for the Group. Our operations in Singapore have largely been supported by the various pro-active Government policies in minimizing the adverse effects of the COVID-19 pandemic, even though the world still faces significant disruptions as a result of the pandemic. However, our operations in Malaysia and Myanmar remain affected by the lacklustre local demand and political uncertainty.

For the Singapore economy, the Ministry of Trade and Industry announced a GDP growth forecast of "3.0 to 5.0 per cent" for 2022, taking into account the higher domestic vaccination rates and booster rollouts, dampened by the potential risk that more virulent strains of the virus may emerge and the impact on the energy market arising from geopolitical tensions between Russia and Ukraine, as well as unpredictable weather conditions from climate change further disrupting the global supply chain, amongst others.

Activities in the construction sector are projected to continue to recover on the back of the progressive easing of border restrictions for migrant workers arriving from the South Asia region, however; the construction sector's output is expected to remain below pre-pandemic levels throughout 2022.

In other parts of South-East Asia, specifically Malaysia, the economy is expected to grow at a faster pace in 2022 due to a pickup in domestic demand and robust external demand. Political uncertainty continues to weigh on the economic policy outlook (Fitch Ratings) as the current Malaysian Government is likely to hold an election in late-2022, before the current term expires in 2023. Myanmar's political scene remains in flux, and we will continue to closely monitor the market conditions and re-evaluate our business strategy in Myanmar as the situation continues to evolve.

In February 2022, the tensions between Russia and Ukraine led to a military invasion of the latter by the former, resulting in international condemnation and fresh sanctions imposed on Russia. We remain cautious of the possible aftershocks of this major event, including disruptions to international supply chains or potential operational risks and we will closely monitor the situation.

Financial Performance

In FY2021, the Group has strived to improve its profit margins, in the face of the limited demand from the construction sector, as some projects were still unable to fully resume activities as a result of the pandemic. For FY2021, the Group has recorded total revenue of S$53.7 million, a yearon-year increase of 0.7%, whereas gross profit was S$13.4 million, rebounding with a record 104.0% year-on-year increase, achieved via stringent cost disciplines practised by management, push for better profit margins from our core equipment rental business, and partly also due to the loss in revenue as a result of Circuit Breaker measures in FY2020. These strengths have also led to a net profit of S$3.8 million, representing a year-on-year increase of 214.9%.

Prospects

As Singapore grows, so shall the public infrastructure grow. Already ranked as one of the top in the world, Singapore's land transport system is always improving to better serve Singaporeans and making commuting more efficient and exploring more enjoyable. At Sin Heng, we are heavily invested in providing best-inclass cranes and services to the civil construction sector and we strongly support the Land Transport Authority's vision for a reliable, people-centred land transport system.

Up and coming MRT expansion projects include the Thomson-East Coast Line ("TEL"), Jurong Region Line ("JRL") and Cross Island Line ("CRL"), and extensions to existing lines such as North East Line ("NEL"), Downtown Line ("DTL") and Circle Line ("CCL").

In the ASEAN region, the general public is realising the possibilities that a good rail network can provide, and construction of an extensive rail network are on several regional governments' election manifestoes. In Malaysia, talks on reviving the KLSingapore High-Speed Rail ("HSR") project have been initiated, while neighbouring Indonesia's Jakarta-Bandung HSR is currently under construction.

Although the general operating business environment in Singapore and the larger ASEAN region remain challenging due to the lingering COVID-19 pandemic and the political uncertainties in the surrounding ASEAN countries, we remain cautiously optimistic that as borders reopen and daily life resumes, demand for our lifting equipment may improve and we can emerge from this depressed period relatively unscathed.

The Group will continue to streamline and update our rental fleet to capitalise on the emerging opportunities when normalcy returns, and we will continue to closely monitor the market conditions to better position ourselves for the future, both financially and operationally.

Dividend

In lieu of the increased profitability and the stellar performance of the Group despite the difficult business environment in FY2021, the Board of Directors believe that it would be appropriate to reward our shareholders for your resolute support throughout this tumultuous period. We are pleased to recommend a dividend of 5.0 Singapore cents per ordinary share, comprising the first and final dividend of 1.0 Singapore cents and a special dividend of 4.0 Singapore cents for FY2021, totalling S$5.7 million. This dividend is subject to shareholders' approval at the forthcoming Annual General Meeting.

Changes to the Board

We are pleased to welcome Mr. Lim Keng Hoe (Lin Qinghe) to join the Board and to contribute his experience and skills to take the Group into the next lap of growth. Mr. Lim has been appointed as an Independent Director with effect from 12 July 2021.

Appreciation

On behalf of the Board and management, we extend our deepest appreciation to our employees for their efforts behind our performance. We owe our success in these turbulent times to their sacrifice and hard work. We would also like to take this opportunity to extend our gratitude to our valued customers and business associates for their loyal support in this challenging period.

Last but not least, we would like to thank each of our shareholders for your continued support. We appreciate your unwavering trust and confidence in us, especially in light of the events occurring in the past years, as we strive to grow the value of your company.


Mr Tan Ah Lye

Executive Director & CEO

Mr Teo Yi-Dar

Non-Executive Non-Independent Chairman
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