First Sponsor Q4 profit plunges 92.7%; proposes to acquire Guangzhou project

FIRST Sponsor Group on Wednesday posted a 92.7 per cent plunge in net profit to S$6.9 million for its fourth quarter ended Dec 31, 2020, from S$94.9 million a year ago.

This came as the mainboard-listed property developer saw its revenue slide 73.5 per cent on lower revenue from the sale of properties, rental income from investment properties, hotel operations and a decrease in revenue from property financing.

Earnings per share stood at 0.76 Singapore cent for the quarter, down 93.5 per cent from 11.75 cents a year ago, according to a bourse filing.

Revenue for Q4 stood at S$39.7 million, down 73.5 per cent from S$149.8 million a year ago. Revenue from the sale of properties saw the deepest plunge of 91.4 per cent to S$8.7 million, from S$101.5 million a year ago.

This was mainly due to the absence of revenue recognition of residential and commercial units from the Millennium Waterfront project in the current period as these have been handed over in the prior years.

For the full year ended Dec 31, 2020, net profit was down 38.3 per cent to S$103.2 million, from S$167.1 million a year ago. Revenue was down 36.1 per cent to S$203.9 million, from S$319.2 million.

First Sponsor has declared a second interim dividend of two Singapore cents for the full year, which will be paid on Feb 26 after the Feb 18 record date. The company paid an interim dividend of 1.1 cents on Oct 1, 2020 for the half year ended June 30, 2020.

Separately, First Sponsor said on Wednesday that it had entered into a conditional sale and purchase agreement to acquire a company with a full stake in a property development project in Panyu, Guangzhou. The group will pay 1.56 billion yuan (S$323.3 million) for the deal and expects to own a 95 per cent interest at completion.

This comes after the group in January acquired an 18 per cent economic interest in a property development project in Fenggang, Dongguan, in a bid to ride on the growth and prospects of the Greater Bay Area (GBA).

FS Dongguan No 6, wholly-owned by First Sponsor, will acquire Hong Kong-incorporated Double Wealthy Company - which owns the land use rights in respect of three development land parcels situated at Liangang Road, Shilou Town, Panyu District.

The Panyu District is located in the southern part of Guangzhou, adjacent to Dongguan and Foshan. It is also in the geographic centre of the Guangdong-Hong Kong-Macau GBA.

These land parcels have a saleable gross floor area of nearly 162,959 square metres (sq m), of which around 98 per cent and 2 per cent are for residential and commercial use respectively.

They will be developed as the third phase of an existing development project named Chuang's Le Papillon. The first and second phases of Le Papillon - which are on adjacent land parcels - were completed in 2012 and 2015 respectively.

In addition to the land parcels, Double Wealthy Company owns one club house, 16 unsold villas and 382 unsold car park lots at Le Papillon's first and second phase. The club house, 15 unsold villas and 368 of the unsold car park lots will be part of the proposed acquisition, First Sponsor said.

Another First Sponsor wholly-owned subsidiary has entered into a conditional sale and purchase agreement with the entity which owns a second club house and one car park lot at Le Papillon.

Prior to the completion of the proposed deal, a company owned by Shu Zhen - who oversees First Sponsor's Dongguan operations - will acquire a 5 per cent stake in FS Dongguan No 6.

First Sponsor group chief executive Neo Teck Pheng said the group continues to be optimistic about the GBA and will actively pursue further opportunities in the region to capitalise on the positive outlook of the GBA development plan.

He noted that the group's hospitality property holding business was hit hard by the Covid-19 pandemic - which saw temporary lockdowns, entry restrictions and border closures.

"The lacklustre performance of the hospitality sector is expected to continue in the near future, which will have a negative impact on the group's profitability," he said.

However, sales of the group's various Dongguan property development projects have to date been "very strong".

As the roll-out of the vaccinations to the worldwide population gathers momentum, business activities across all sectors are expected to pick up, he added.

"The group will review its business investment strategy on an ongoing basis to ensure that it remains relevant in the post-Covid-19 new normal," Mr Neo said.

Shares of First Sponsor closed 1.48 per cent or S$0.02 higher at S$1.37 on Wednesday.