First Sponsor Group Ltd (SGX: ADN) released its fiscal second-quarter earnings report last Friday evening after the market close. As a brief introduction, First Sponsor Group, which was listed just a year ago on July 2014, has three core businesses. It’s a property developer in China with a focus on the country’s second-tier cities like Chengdu and Dongguan; it’s an owner of commercial properties in both China and the Netherlands; and it’s lastly a provider of property financing services in China. With that, let’s dig into the firm’s latest quarterly release. Financial highlights For the fiscal second-quarter ended 30 June…
First Sponsor Group Ltd (SGX: ADN) released its fiscal second-quarter earnings report last Friday evening after the market close.
As a brief introduction, First Sponsor Group, which was listed just a year ago on July 2014, has three core businesses. It’s a property developer in China with a focus on the country’s second-tier cities like Chengdu and Dongguan; it’s an owner of commercial properties in both China and the Netherlands; and it’s lastly a provider of property financing services in China.
With that, let’s dig into the firm’s latest quarterly release.
For the fiscal second-quarter ended 30 June 2015, First Sponsor Group recorded an astonishing 354% jump in total revenue from S$6.61 million a year ago to S$29.98 million. Consequently, the company’s bottom-line had made a great improvement by turning a loss of S$3.25 million a year ago into a profit of S$7.62 million.
Moving on to its financial position, First Sponsor Group’s total debt had grown by 50% from S$181 million seen in the previous quarter three months ago to S$271 million. The increase in borrowings, which was mainly used to acquire Holiday Inn/Holiday Inn Express hotels in Amsterdam, had pushed up the company’s gearing ratio (net debt over total equity) from 11.5% to 18.9%.
During the reporting quarter (on 15 May 2015 to be exact), First Sponsor Group had managed to establish a S$1 billion multicurrency debt issuance programme; this will give the company an additional source of funding to tap into should the need arise.
On the cash flow front, First Sponsor Group managed to bring in S$21.6 million in operating cash flow for the quarter. With capital expenditures of S$6.1 million; this gives the real estate outfit free cash flow of S$15.5 million. For context, First Sponsor’s self-same figures for the same quarter a year ago were –S$165.3 million, S$6.6 million, and –S$171.9 million, respectively.
The real estate outfit ended the reporting quarter with a net asset value of S$1.567, up 15.2% year over year.
First Sponsor Group had declared a dividend of 0.70 Singapore cents for the quarter. There were no dividends seen for the same period last year.
Operational highlights and a future outlook
First Sponsor Group’s strong top-line performance can be attributed to broad-based growth across its three core businesses.
On the property development front, First Sponsor Group had recognized additional revenue from its Millenium Waterfront project partly due to the first-time handover of certain commercial units in June 2015; this allowed the segment’s revenue to spike massively from just S$0.9 million a year ago to S$19.0 million.
(The Millenium Waterfront is a mixed-use residential and commercial development that includes the Millennium Waterfront Chengdu Hotel in Chengdu’s Wenjiang District.)
For the property holding segment, the Zuiderhof property in the Netherlands that was acquired in February 2015 had contributed the lion’s share of the segment’s growth in revenue from just S$0.1 million a year ago to S$2.2 million.
Lastly, First Sponsor Group’s property financing business had registered a 62.9% year over year jump in revenue to S$8.0 million on the back of a larger entrusted loan portfolio. The firm has yet to experience any loan defaults to-date and the interest payments on all loans have been current.
Moving forward, First Sponsor Group expects to handover more residential and commercial units for its Millenium Waterfront project for the rest of 2015. The company also expects to handover Plot C residential units in various phases for the Millennium Waterfront project starting from December 2015.
The company had also made its second acquisition in the Netherlands, of the Arena Towers (which houses the Holiday Inn hotels), on 17 June 2015. Together with the Zuiderhof property, First Sponsor Group expects its commercial real estate in the Netherlands to be “significant profit contributors to the property holding business segment” in the future.
First Sponsor Group last changed hands at S$1.305 last Friday. This translates to a price-to-book ratio of 0.83.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.