Sundart Holdings Limited (Stock Code: 1568) Annual Results Announcement for the Year Ended 31 December 2025

Executive Summary

Sundart Holdings Limited, a leading integrated fitting-out contractor in Hong Kong, Macau, Singapore, and the PRC, has released its audited annual results for the year ended 31 December 2025. The results reveal a challenging year with significant decreases in both revenue and profit, but the company maintains a solid financial position and continues to pay dividends. Several strategic initiatives and market dynamics, including a material joint venture and acquisition, are likely to interest investors and could influence share price.

Key Financial Highlights

• Revenue: HK\$5,135.8 million, down 14.4% from HK\$5,996.8 million in 2024.
• Gross Profit: HK\$684.7 million, down 14.4% from HK\$800.2 million.
• Gross Profit Margin: Stable at 13.3%.
• Profit Attributable to Owners: HK\$267.3 million, down 16.7% from HK\$320.8 million.
• Basic and Diluted Earnings per Share: 12.38 HK cents (down 16.7%).
• Final Dividend Proposed: HK5 cents per share (total HK\$107.9 million) – a payout ratio of 40.4%.
• Strong Net Current Assets: HK\$2,619.4 million; Bank Balances and Cash: HK\$1,985.1 million.
• Gearing Ratio: 1.1%, up from 0.3% due to increased short-term bank borrowings.

Business Review and Segment Performance

Fitting-out Works

• Remains the main revenue driver, contributing approximately 97.5% of total revenue.
• Revenue dropped 16.4% to HK\$5,008.7 million due to fewer large projects in Hong Kong and Singapore compared to the previous year.
• Gross profit from fitting-out works fell 21.0% to HK\$640.9 million; gross margin slightly decreased to 12.8%.
• During the year, 106 fitting-out projects were completed: 19 in Hong Kong, 9 in Macau, 1 in Singapore, and 77 in the PRC. As of year-end, 167 projects were on hand, with an outstanding contract value of HK\$6,778.2 million.

Alteration, Addition & Construction Works

• Revenue increased to HK\$5.0 million (from HK\$2.4 million), mainly due to final account agreement for a residential project.
• No projects were completed during the year.
• Gross loss improved to HK\$1.4 million (from HK\$10.9 million), but gross loss margin remains significant at 28.0% (previously 454.2%) due to rectification costs.

Manufacturing, Sourcing & Distribution of Interior Decorative Materials

• Revenue surged to HK\$122.1 million (from HK\$2.0 million), primarily due to a major order from a customer in the Philippines.
• Gross profit improved to HK\$45.2 million, with a strong gross margin of 37.0% (up from 10.0%).
• The Group’s manufacturing base in Dongguan, PRC, is a key asset, supporting large projects and diversification.

Material Corporate Developments

Joint Venture and Acquisition

Potentially Price-Sensitive Event:
On 9 April 2025, Sundart’s wholly-owned subsidiary formed a joint venture (JV Company) with Lead Rise International Limited and Quarella Global Limited to acquire the entire issued share capital of Quarella Group Limited and associated loans for a consideration of HK\$240 million.

This acquisition could be a significant step towards business diversification and expansion, and may be a key share price catalyst as it could impact future earnings and strategic positioning.

Financial Assets at Fair Value Through Profit or Loss (FVTPL)

• As at year-end, the Group held HK\$21.1 million in financial assets at FVTPL (split between listed equity securities and financial products).
• A net fair value loss of HK\$2.4 million was recognised, a notable improvement from a HK\$57.4 million loss in 2024.
• None of the financial assets at FVTPL individually represented more than 5% of total assets.

Liquidity, Capital Structure and Risk

• Net current assets decreased to HK\$2,619.4 million from HK\$3,147.6 million, mainly due to dividend payments and capital expenditure.
• Current ratio remains healthy at 1.8, though slightly down from 1.9.
• All bank borrowings (HK\$40.6 million) are short-term and denominated in RMB at fixed rates.
• Capital commitments decreased to HK\$27.6 million (from HK\$163.1 million), reflecting disciplined capital management.
• The company does not currently hedge foreign exchange or interest rate risk but continues to monitor exposures.
• No significant contingent liabilities reported.

Credit Risk and Receivables

• Trade receivables net of impairment: HK\$1,122.5 million; unbilled receivables: HK\$1,141.5 million.
• The Group experienced delays in settlement of PRC projects due to property market weakness, prompting increased impairment provisions.
• Management is actively monitoring receivables and adjusting credit policies to mitigate risk from major customers, especially in the PRC.

Dividend and Shareholder Returns

• Final dividend of HK5 cents per share proposed (total: HK\$107.9 million), representing a payout of 40.4% of distributable profit, in line with dividend policy.
• Dividend subject to approval at the AGM scheduled for 1 June 2026; record date for dividend is 9 June 2026, with payment expected on 18 June 2026.
• No share buybacks, sales, or redemptions in 2025. No treasury shares held.

Corporate Governance and Compliance

• Full compliance with the Corporate Governance Code except for one deviation due to director absence at the last AGM.
• All directors and relevant employees confirmed compliance with the Model Code for Securities Transactions.
• Audit Committee, consisting of three independent non-executive directors, reviewed the annual results with the auditor, BDO Limited.

Outlook and Strategic Direction

Hong Kong

The Group is focused on strengthening relationships with key property developers and main contractors to secure recurring business and maintain market leadership, despite the market not having returned to pre-pandemic levels.

Macau

Management remains optimistic about medium- to long-term growth, with major property enhancements and new developments expected. The Group is positioning itself to capture future fitting-out opportunities in the hospitality sector.

Singapore

Sundart’s high-end hotel projects provide stability and risk diversification. The Group will continue to focus on delivering excellence in this segment to strengthen its regional reputation.

PRC

While economic growth is moderating, the Group sees opportunities in government-backed housing initiatives and will target high-quality, financially sound customers, with an emphasis on disciplined execution and risk management.

Overall Strategy

The Group is committed to consolidating its core businesses while selectively expanding and diversifying revenue streams to enhance stability and mitigate regional risks. Prudent financial and risk management, along with a focus on quality execution, remain top priorities.

Events After the Reporting Period

• No significant events after year-end that would materially affect the Group’s operations or financial position were reported.

Employee Update

• Headcount decreased to 1,575 (from 1,628), but gross staff costs rose 2.4% to HK\$524.8 million due to bonus adjustments.
• Ongoing investment in staff training and development.

Potential Share Price Catalysts & Risks

• The substantial decrease in revenue and profit may put downward pressure on the share price.
• The acquisition of Quarella Group Limited, via a new joint venture, is a significant strategic move that may impact future earnings, and thus could be share price sensitive.
• Stable dividend payout is positive for yield-focused investors.
• Risks remain around credit exposure, especially in the PRC, and the overall macroeconomic environment.

Disclaimer

This article is for informational purposes only and does not constitute investment advice, an offer, or a recommendation to buy or sell any securities. Investors should conduct their own research or consult professional advisors before making investment decisions. The author and publisher accept no liability for actions taken based on the information contained herein.

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