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First Sponsor Q1 profit rises 39% to S$23.8m

MAINBOARD-LISTED First Sponsor Group’s first quarter net profit rose 39 per cent to S$23.8 million for the three months ended March 31, from S$17.1 million a year ago.

This was from a “strong showing” of its property financing business segment, the Singapore-based property developer with development projects in China and the Netherlands said in a regulatory filing on Thursday. (see amendment note)

The company’s earnings per share stood at 3.43 Singapore cents, up from 2.64 cents the year prior. It did not declare a dividend for the quarter, similar to a year ago.

Shares of First Sponsor closed flat at S$1.28 on Wednesday.

First Sponsor’s revenue for the quarter dropped 5.2 per cent to S$45.3 million, from S$47.8 million the year before. This was on the back of a drop in revenue from the sale of properties and rental income from investment properties, offset by revenue increases in property financing and hotel operations.

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Revenue from the sale of properties had dropped 37 per cent to S$8.8 million, from S$13.9 million a year ago, due mainly to the recognition of revenue from fewer units in the company’s Millennium Waterfront project.

Rental income from investment properties dropped 15 per cent to S$3.0 million, from S$3.6 million a year ago, mainly due to an absence of a one-off service income of S$400,000 charged for Q1 2018 by the group to its 50 per cent-held joint venture that owns the leased Le Meridien Frankfurt Hotel.

Hotel operations revenue rose 8.9 per cent to S$10 million, from S$9.1 million a year ago, from full-quarter contributions from the company’s Hilton Rotterdam Hotel, which the group had been leasing since February 2018. This was partially offset by the absence of contribution from M Hotel Chengdu which ceased operations in July 2018, the group said.

Property financing revenue increased 11.6 per cent to S$23.5 million, from S$21.1 million a year ago. This was from a 2.8 billion yuan (S$567.6 million) China property financing loan book at the end of fiscal 2018, and a higher average secured China loan portfolio for the current quarter which saw a S$9.6 million increase in interest income. This was partially offset by the absence of net penalty interest income from successfully enforcing action on defaulted China loans under Case 2, contributing S$7.7 million.

In terms of outlook for its property development segment, the group is targeting to acquire a 100 per cent equity interest in a 76,570 square metre mixed use development site in Chang'an, Dongguan. It intends to designate a third party as one of the purchasers, subject to the group retaining a controlling stake.

This comes as China’s government unveiled the development timeline of the Guangdong-Hong Kong-Macao Greater Bay Area in February 2019, which also covers Dongguan as it falls in the Pearl River Delta area.

“If the acquisition is successful, the group will work towards the pre-sale launch of Phase 1 as soon as possible,” said Neo Teck Pheng, group chief executive officer.

The group will also be undertaking a rights issue expected to rake in around S$147.9 million in gross cash proceeds from the subscription of capital securities, expected to close in June 2019. It also intends to redeem all outstanding Series-1 perpetual convertible capital securities after the rights issue and bonus issue is completed. The exercise of the warrants may raise gross proceeds of up to an estimated S$251.4 million.

Amendment note: An earlier version of this article incorrectly stated that First Sponsor is a China-based property developer when in fact it is a Singapore-based property developer with development projects in China and the Netherlands. The article has been revised to reflect this. 

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