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Straits Trading Co Ltd’s Net Profit for the First Quarter of 2018 Falls by Around 54%

Straits Trading Co Ltd (SGX: S20), as a quick background, has stakes in real estate, hospitality, resources and investments across the Asia-Pacific region.

Yesterday, the company announced its financial results for the first quarter ended 31 March 2018. Here are some key highlights that investors should know from the latest earnings:

1. Total revenue fell 7.2% year-on-year, from S$133.5 million to S$123.9 million. The fall was due to a poor showing in the tin mining and smelting business, which was partially offset by higher revenue in the property segment. Tin mining and smelting revenue dropped 8.1% to S$119.4 million while property revenue grew 29.4% to S$4.5 million.

2. Net profit plunged 53.6% to S$9.7 million. The real estate segment posted earnings of S$8.8 million in the latest quarter, compared to S$18.1 million a year ago due to the “absence of the marking of investment properties acquired by an associate to their valuations”. Meanwhile, the resources business saw a net profit of S$0.8 million in the first quarter of 2018 versus S$2.4 million a year ago due to “lower sales volume of refined tin, lower recovery yield and higher operating expenses”.

3. Consequently, basic earnings per share fell 53.6%, from 5.1 Singapore cents to 2.4 Singapore cents.

4. As at 31 March 2018, Straits Trading had cash and short-term deposits of S$256.6 million and total borrowings of S$847.8 million. This gives a net debt position of S$591.2 million. In comparison, at the end of last year, it had S$406.2 million in net debt.

5. Net asset value per share at the end of the latest quarter stood at S$3.52, down from S$3.62, as at 31 December 2017.

6. During the reporting quarter, the company had an operating cash flow of negative S$50.3 million mainly due to the purchase of short-term quoted securities. In contrast, it generated positive operating cash flow of S$4.8 million a year ago. It spent S$128.1 million in capital expenditure for the latest period, which includes the purchase of investment properties in Japan and Australia. This is opposed to capital expenditure of just S$722,000 spent last year.

7. Straits Trading, in the first three months of the year, acquired four new properties to raise its Japan residential portfolio to nine assets with 920 units. It has plans to expand to other cities such as Yokohama, Fukuoka and Nagoya. Meanwhile, the firm’s 54.8%-owned resources arm, Malaysian Smelting Corporation Berhad or MSC (SGX: NC9), commenced early testing and commissioning of its new tin smelter in Port Klang, Malaysia. Straits Trading believes recovery yields, production and cost efficiencies will improve once the new facility is operating fully.

8. Executive chairman of Straits Trading, Chew Gek Khim, said the following about her firm’s growth plans:

“We intend to further grow our Japan residential rental properties, which are now providing a source of immediate and recurring income, to aggregate into a larger portfolio to obtain the highest risk-adjusted returns.

We will also continue to redeploy capital into attractive investments in other regional markets to grow our already sizable real estate asset base. Some of the markets we like are China and Australia, the latter which is showing signs of recovery in the office market. We are also optimistic about our 21% investment stake in the now privatised ARA Asset Management which has aspiration to increase its AUM from the current $40 billion to $100 billion by 2022.”

Straits Trading’s shares last changed hands at S$2.18 yesterday. This gives a price-to-book ratio of 0.6 and a dividend yield of 2.7%.

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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 Sudhan P doesn’t own shares in any companies mentioned.