SINGAPORE (July 31): DBS is maintaining its “buy” call on First Sponsor Group with a target price of $1.62.
In a Monday report, analyst Rachel Tan says, “First Sponsor is one of the rare property developers listed in Singapore that will benefit from higher demand fuelled by post-Brexit relocation to Netherlands.”
Currently, the group owns 13 properties/projects in the Netherlands, mainly in Amsterdam, as well as one hotel property in Germany.
On the other hand, the group on Friday announced that its 2Q18 earnings have increased by 29% to $12.1 million.
This was despite revenue dropping 21.2% y-o-y to $44.1 million, mainly due to a $38.6 million decline in revenue from sale of properties led by recognition of revenue from fewer units in the Millennium Waterfront project.
Cost of sales dropped 48.6% y-o-y to $16.2 million, while net other expenses also dropped 45.8% to $3.3 million.
The group also declared an interim dividend of 1 cent for the period.
See: First Sponsor reports 29% rise in 2Q18 earnings to $12.1 mil despite lower revenue recognition
The group’s net profit came in at $29 million, 24% higher y-o-y and 33% of the analyst’s FY18 estimates, impacted by the timing in recognition of sale of properties.
The growth in net profit was led by contributions from newly acquired hotels and higher contributions from property financing.
In 1H18, the group’s income from its European property portfolio doubled, mainly attributable to contributions from its newly acquired hotel – Bilderberg Portfolio, Hilton Rotterdam Hotel and Le Meridien Frankfurt Hotel – and office assets – Meerparc office.
The group also acquired a new land bank in Dongguan, China with its partner Vanke. This project is expected to launch its first phase by year-end and the management believes that the new land bid will allow them to benefit from strong demand due to residential supply crunch in Dongguan.
In addition, the group in 2H18 will recognise some divestment gains.
“We estimate that total divestment gain to be recognised in 2H18-1H19 is $25 million, which has yet to be accounted for in our estimates,” says Tan.
As at 10.50am, shares in First Sponsor are trading flat at $1.32 or 0.7 times FY19 book with a dividend yield of 1.9%.
