Good News on Listing | Frost & Sullivan Assists Springview Holdings Ltd. in Successful US Listing (Nasdaq: SPHL)

Springview Holdings Ltd (hereinafter referred to as 'Springview Holdings') successfully listed on October 17, 2024, with an issue of 1.5 million shares at a tender price of $4, raising $6 million. Frost & Sullivan (Frost & Sullivan, hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Springview Holdings' listing and hereby extends its warmest congratulations on its successful listing.

During the process of listing in the US this time, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support and highlight the company's competitive advantages, assisting the company, investment banks and other intermediaries in completing the relevant parts of the prospectus (such as overview, competitive advantages and strategy, industry overview, business and other important chapters), helping the company communicate with the Hong Kong Stock Exchange and investors, assisting investors in quickly understanding the market ecosystem and competitive landscape, and assisting the company in completing various feedbacks from the US Securities and Exchange Commission regarding industry issues.

● Definition and Classification

New construction refers to the complete demolition and reconstruction of existing buildings, including residential, commercial, industrial, and institutional buildings. The scope of construction work may vary depending on the nature of the work or the ultimate use of the construction project. It usually includes the construction of the superstructure, steel structures, etc.

Reconstruction refers to the replacement of major parts of a building, involving changes to the existing structure, facade, and/or an increase in the gross floor area (GFA) by more than 50%.

Renovation and expansion (A&A) work involves minor projects on existing buildings that do not increase the total floor area of the property by more than 50%, and do not allow for additional floor height. A&A refers to minor construction work on existing properties that do not affect the foundation and structure of the property, which may include renovation, maintenance, and repair work. A&A work on existing buildings involves but is not limited to new structural design, inspection of the structural adaptability of existing buildings, renovation and addition of structures such as floors, stairs, and attics, as well as interior space decoration to suit living conditions. A&A services include demolition, renovation, decoration work, changes in facility configuration; changes in the use of buildings; manufacturing, modification, demolition, or installation of hardware and equipment; construction, relocation, or demolition of partitions, doors and windows; as well as changes in decoration materials and flooring materials, construction of swimming pools, etc.

Renovation refers to the process of making an indoor space suitable for living, typically including site preparation work, partitioning, steel and metal work, carpentry, stone work, plastering and painting, as well as certain construction services such as mechanical and electrical system installation, plumbing and drainage system installation. General renovation work can be divided into commercial (offices, hospitals, and entertainment facilities) and residential (apartments and houses). Customization, manufacturing, and supply of carpentry and other important fixtures also play an important role in renovation services. Interior design services form a considerable market.

● Market scale

The market scale of reconstruction projects in Singapore increased from S$986.6 million in 2017 to S$1192.2 million in 2022, with a compound annual growth rate of 3.9%. In 2022, the market scale of residential reconstruction projects reached S$1192.2 million, accounting for 39.1% of the overall market scale. The growth between 2017 and 2019 was mainly driven by the start of new construction projects located on developed land that needed reconstruction. However, due to economic slowdown and the downturn in the construction industry, the growth of the demolition market decreased between 2020 and 2021, as demolition projects are usually considered pre-construction work, and the supply of remediated land is crucial for new construction projects. With sustained reconstruction driven by economic recovery and potential redevelopment projects, it is expected that the market scale of reconstruction projects will maintain a stable growth rate of 5.3% in terms of revenue between 2023 and 2027.

Source: Frost & Sullivan report

With the continuous advancement of urbanization and population growth, Singapore's infrastructure, housing, and commercial facilities are undergoing reconstruction, which has become an important catalyst for redevelopment and revitalization projects. The market size of new construction projects increased from S$9.7689 billion in 2017 to S$10.8501 billion in 2022, with an annual compound growth rate of 2.1%. In 2022, the market size of new construction projects in the residential sector reached S$4.2485 billion, accounting for 38.3% of the overall market size. The demand for new projects is driven by efforts to reconstruct residential and commercial buildings, transportation systems, public facilities, and utilities, such as the reconstruction of Marine Park Community Towers and the redevelopment of the North-South Link and Merlion Towers/Plaza. It is expected that the market size of new construction projects in Singapore will grow at an annual compound rate of 5.6% between 2023 and 2027, based on revenue.

Source: Frost & Sullivan report

Thanks to the continuous expansion of the Singapore construction market and the improvement in residents' living standards and demand, the market size of renovation and extension (A&A) projects in Singapore has grown from S$4.1866 billion in 2017 to S$4.5729 billion in 2022, with a compound annual growth rate of 1.8%. In 2022, the market size of A&A projects in the residential sector reached S$1.7964 billion, accounting for 39.3% of the overall market size. In addition, continuous urban development plans will also promote the supply of residential units and demand for A&A projects, which are expected to drive the A&A project market to grow at a compound annual growth rate of 5.4%, reaching S$58.351 billion by the end of 2027.

Source: Frost & Sullivan report

● Market Drivers and Opportunities

The intensification of land scarcity in Singapore: The land scarcity problem in Singapore has coaxed a continuous demand for new construction projects with economic development. According to data from the Singapore Land Authority, the number of approved land plots decreased from 1,842 in 2018 to about 1,081 in September 2022. In 2023, Singapore's population density reached 8,592 people per square kilometer, mainly driven by newborns and immigrants. In addition, the National Development Plan "Singapore 2030" indicates that it is expected that the total land area will steadily increase by 2030 to reach 766 square kilometers. Considering the reduction in land supply and the demand for new construction development, Singapore's demand for new construction projects is expected to increase in the near future.

Continuous development of construction technology: The construction industry is effectively driven by rapid technological progress. The government continues to advocate for the adoption of advanced manufacturing and assembly techniques throughout the construction phase. For example, prefabricated precast volume buildings (PPVC) require that interior decoration, fixtures, and accessories of independent three-dimensional modules be completed in off-site manufacturing facilities before installation and delivery on site. Through centralized production, this method has increased efficiency by up to 40%, reduced dust and noise pollution at construction sites, and ensured the quality of finished products. Since 2014, specific government land sale (GLS) plots have been required to use PPVC according to the Building and Construction Authority (BCA). This regulation has forced construction contractors to continuously update with the latest technological advancements to improve construction efficiency. In addition, this has also created a demand for consultants and builders specializing in related fields. Furthermore, it is expected that the government will continue to encourage the implementation of more automation and robotics in prefabrication processes to reduce the future reliance on manual traditional assembly methods.

Urban renewal and sustainable demand: The Singaporean government is committed to urban renewal and redevelopment initiatives, including neighbourhood renewal schemes, the Reshape Our Homes scheme, and selective complete redevelopment schemes, as municipal development matures. Components of these initiatives include community transformation, redevelopment of old structures, and modernization of urban infrastructure. At the same time, preserving key elements helps reflect the local identity and uniqueness. On the other hand, by building new community facilities, improving streetscapes, and enhancing public spaces, the functionality and reputation of the city are enhanced. In addition, it is foreseeable that more residential areas will be reconstructed to meet changing community needs. Singapore's demand for these redevelopment projects will continue to be driven by relevant initiatives.

Government support for construction transformation: According to the Building and Construction Authority (BCA), Singapore actively participates in the sustainable development of the construction industry, promoting changes through transformation. Singapore will further advance the automation of manufacturing and assembly processes in accordance with the Industry Transformation Map (ITM) for the construction environment sector, while strengthening integrated planning and design. It is worth noting that the investment allowance scheme implemented in 2021 allows enterprises to deduct up to 50% of the approved fixed capital expenditure on construction equipment and materials from their taxable income, providing tax relief for beneficial construction equipment. By reducing the cost of purchasing or leasing necessary equipment and materials, the capabilities and strength of construction contractors have been enhanced. Therefore, the growth in market demand and the implementation of these favorable measures have jointly promoted the continuous expansion of the construction industry, benefiting the reconstruction sector.

● Competitive landscape

New construction, reconstruction, addition and renovation projects in Singapore, interior decoration, custom woodworking and furniture, as well as restoration projects are usually divided into four parts, including: (i) New construction; (ii) Reconstruction; (iii) Addition and renovation; (iv) Interior decoration, custom woodworking and furniture, and restoration projects.

To engage in the aforementioned projects, one must first register with the Contractors Registration Office maintained by the Building and Construction Authority (BCA). This is a prerequisite for participating in public sector construction project bidding or executing construction projects (as either the main contractor or subcontractor). In addition, all contractors engaged in construction projects in Singapore must hold a permit if the project requires approval from the BCA. This includes general contractors (GB1/GB2) and specialized contractors, which are divided into two categories based on the permitted project value. The latter focus on foundation support and stabilization works, prefabricated concrete works, in-situ post-tensioning works, pile driving works, site survey works, and structural steel works. Permits are issued to contractors who meet specific requirements, such as having a paid-up capital, professional technical capabilities, performance records, and employees with relevant professional qualifications.

● Barriers to entry

Technical Capability Barriers: Entering the construction contracting industry requires a diverse skill set, including architectural design, structural engineering, interior design, renovation, and construction. For example, different functions and aesthetics in architectural interior decoration require different construction techniques and methods. Therefore, to ensure the quality of architectural interior decoration, each actual project must be individually evaluated and appropriate and efficient construction techniques must be adopted. At the same time, these professional capabilities must be continuously revised and enhanced to adapt to the changing needs of the market. However, new entrants into the market may lack project experience and relevant methodologies.

Reputation and relationships with stakeholders: In highly competitive and fragmented markets, it is crucial to establish a positive brand image and reputation. Customers tend to choose those construction and home improvement contractors with a good reputation and trustworthiness. In addition, contractors with rich experience are more likely to provide high-quality craftsmanship and professional services. However, new entrants in markets lacking established reputation face more challenges in initially attracting consumers.

Initial capital requirements: The construction and interior contracting industries require a certain amount of capital and resources to meet operational obligations. Contractors must purchase and lease construction tools, materials, and equipment, hire and train personnel, and make various project-related prepayments. New market participants lacking sufficient capital may face more severe operational obstacles.

Licenses and approvals: In Singapore, contractors engaged in construction projects such as reconstruction, alteration, and addition usually need to possess qualifications and licenses that prove their comprehensive understanding of relevant policies and policy changes. For example, construction standards and quality for additions and alterations may be influenced by the customer's geographical location in Singapore. In addition, certain projects may require authorization from the Urban Redevelopment Authority (URA), the Building and Construction Authority (BCA), or the Housing Development Board (HDB), such as projects involving fire safety and protection. New market participants must have a comprehensive understanding of the licenses required in their customer's location, as well as the policies and guidelines governing construction work.