First Sponsor's profits jumped 39.02% to $23.8m in Q1

The 87% gross profit increase from its property financing business segment boosted earnings.

First Sponsor entered 2019 on a high note after its profits leapt 39.02% YoY to $23.8m in Q1 from $17.12m in 2018, an announcement revealed. However, revenue slipped 5.2% YoY from $47.8m to $45.34m.

The profit growth was partly attributed to the strong showing of the property financing business segment, which recorded an 87% YoY gross profit increase of $21.8m from Q1 2018’s $11.6m.

Also read: First Sponsor's profits rose 28% to $113m in 2018

The drop in revenue was due to the sale of properties, and subsequent dip in revenue by $5.1m, and rental income from investment properties of $600,000. That said, the decrease was offset by the increase in revenue from property financing and hotel operations of $2.4m and $800,000, respectively.

On 29 March 2019, the group completed the acquisition of a 94.9% equity stake in the 340- room Westin Bellevue Dresden Hotel, Germany, based on a commercial property value of approximately $75.7m (EUR49.5m), including estimated acquisition costs.

“The acquisition has further expanded the recurrent income base of the Group’s property holding business segment in Germany after the acquisition of the 50% equity interest in the Le Méridien Frankfurt last year,” CEO Neo Teck Pheng said in a statement.

Meanwhile in the Netherlands, the newly developed Oliphant Amsterdam office property with 21,136 sqm of net lettable area is currently 61% leased with a weighted average lease term (WALT) of 12 years. The group is reportedly in advanced discussions with various potential tenants to lease the bulk of the remaining spaces within FY 2019. The development of the 142-room Crowne Plaza and 193-room Hampton by Hilton hotels in Utrecht is also expected to be completed within FY 2019.

“The group is also considering the sale of Oliphant Amsterdam and the Utrecht hotels to its associated company, FSMC, to partially realise capital gains,” Neo added.

On the Dongguan property development front, the group has entered into a framework agreement in March 2019 for the potential acquisition of a mixed use development site with a gross floor area (GFA) of approximately 76,570 sqm in Chang’an, Dongguan. If the acquisition is successful, the group will work towards the pre-sale launch of Phase 1 as soon as possible, the firm highlighted.

To further strengthen the group’s balance sheet to arm the group with financial resources to capitalise on any expansion opportunity, First Sponsor will be undertaking a 1-for-7 rights issue of 3.98% perpetual convertible capital securities with free detachable warrants, as well as a 1-for-10 bonus issue of warrants.

Also read: First Sponsor Group to undertake rights issue for $399.5m

First Sponsor said it expects to raise up to approximately $399.3m in gross cash proceeds from the subscription of the capital securities under the rights issue (up to $147.9m) and the exercise of the warrants (up to $251.4m).

The rights issue is expected to close in June 2019.