SINGAPORE (Aug 30): KGI likes property developer First Sponsor Group for having almost sold all the apartments in its China condo project as well as its acquisition of a Dutch hotel chain.
First Sponsor says its Millennium Waterfront mixed development in Chengdu has sold 99% of the aggregate 7,302 residential units in 2Q17 and 71% of its 371 commercial units.
In a Wednesday unrated report, analyst Colin Tan says, “We project that about $489 million in revenue could be recognised in the next few years upon progressive handover of the units to the buyers, based on a RMB/SGD exchange rate of 4.90.”
Through its China subsidiary, Shanghai Sigma, First Sponsor also provides third-party property financing. However, some of the loans have been in default since Dec 2015, resulting in a cessation of income recognition.
Tan believes that First Sponsor is likely to recover these default interests of $26 million in FY17F, while the group is also expected to recover another $17.2 million in default interests pending foreclosure procedures by FY18F.
Meanwhile, the group has recently acquired a 95% stake in Queens Bilderberg which operates a chain of hotels in Amsterdam, Rotterdam and The Hague.
See: First Sponsor to acquire Dutch heritage branded hotel portfolio for $323 mil
Tan views the acquisition positively as it allows the group to capture growth opportunities in the booming Dutch hotel industry, which has been posting positive RevPAR growth since 2010.
‘We opined the acquisition is a fair price as many other listed European hotel peers are trading at an EBITDA yield range of 4.6% – 6.3%,” says Tan who is ascribing First Sponsor with a fair value of $1.62.
The stock is trading at 0.8 time price to book with a FY16 dividend yield of 1.4%.
As at 3.20pm, shares in First Sponsor are trading 2 cents lower at $1.36.
