Latest / Investor Exchange / First Sponsor Group: Strong 1H2025 Profit Growth and Strategic Expansion

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First Sponsor Group: Strong 1H2025 Profit Growth and Strategic Expansion · Investor Exchange

• 0:00
  Music.
• 0:11
  We're getting into the details of a company navigating some,
• 0:14
  well, pretty interesting waters in global real estate.
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  That's First Sponsor Group Limited, or FSGL.
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  Right. They're listed on the Singapore Exchange, and they have their fingers
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  in quite a few pies, property development, property holding,
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  financing across Asia and Europe, too.
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  Exactly. And our mission today is to really unpack their latest unaudited financial results.
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  This is for the first half of 2025, what they call 1H 2025.
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  We've got the official press release, the detailed financials,
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  the investor slides, all dated July 28, 2025.
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  So pretty fresh data. That's right. We want to go beyond just the headline numbers,
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  understand what's driving their performance, the good, maybe the not so good,
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  and crucially look at their strategy going forward.
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  Yeah, get a proper feel for how they're managing things. And let's face it,
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  a pretty dynamic property market globally.
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  Okay, let's dive in then. Now, the first thing that probably jumps out at you
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  if you just glance at the headlines is this.
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  FSGL's net profit for this first half surged. I mean, really surged up 59.2
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  percent to 17.8 million dollars compared to last year. That's a big number. Yeah.
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  A very healthy increase. But and here's where it gets really interesting.
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  This happened even though their revenue actually went down. It decreased by
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  11.0 percent, falling from a 772.9 million dollars last year to S153.9 million dollars this half.
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  Right. So the big question is, how do you manage that? How does profit shoot
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  up when the money coming in the front door actually drop?
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  That's the million dollar question, isn't it? Well, the SAS 19.0 million dollar
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  question here. And it really points to a key part of FSGL's strategy.
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  The main reason for that profit jump, despite lower direct revenue,
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  was a much, much higher share of profits coming from their associates and joint
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  ventures. Oh, OK. So their partnerships.
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  Exactly. Think of it like this. Their core business maybe took a step back revenue-wise,
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  these external turnerships, these JVs, they really delivered.
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  They contributed significantly more to the overall bottom line this time around.
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  So it cushions the blow from their direct operations.
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  Precisely. It shows the value of that diversification.
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  And you see this reflected in the earnings per share, the EPS too.
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  Basic EPS was up 8.4% to 1.16 cents, and diluted EPS jumped quite a bit,
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  up 26.1%, also to 1.16 cents.
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  And even their interest cover, which basically tells you how easily they can
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  pay interest on their debts from profits.
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  That ticked up slightly, too, from 2.0 times to 2.1 times. So a little more
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  comfortable servicing their debt.
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  Right. So the underlying financial health seems OK, even with that revenue dip.
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  It's more about where the profit came from. Exactly. The composition changed significantly.
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  OK, so let's break down that 11.0 percent revenue decrease then.
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  Where did they feel the pinch most in their own direct operations?
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  Well, it was pretty concentrated. The biggest hit was in their property development
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  segment. Revenue there dropped quite sharply by $14.8 million,
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  or about 28%, down to S$38.1 million.
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  Oh, okay. With such a big drop there. It mostly came down to project handovers.
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  In the first half of last year, 1H 2024, they had significant contributions
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  from handing over units in projects like Primus Bay and Millennium Waterfront Plot E1.
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  This year, in 1H 2025, the main handover contribution was from a project called
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  The Brilliance. And that wasn't enough to match the previous period.
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  Not only that, but the sales from the Brilliance actually came with lower gross
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  profit margins compared to those earlier projects.
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  So less volume and lower margins from the main contributor. Double hit.
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  OK, what else? Property financing also saw a noticeable dip.
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  Revenue there was down $4.9 million, or just over 21%, settling at S18.1 million dollars.
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  And the reasons there? Mainly two things. They had a smaller loan book,
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  just less value in outstanding loans, particularly in China.
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  And they didn't have revenue coming in from a specific joint venture loan,
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  the Fangang loan, which contributed last year. Okay.
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  Hotel operations. That was almost flat, actually. Just a tiny decrease of 0.2
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  million dollars or 0.2 percent. So pretty stable there.
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  So property development and financing took the main hits.
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  Was there any segment, any part of their direct business that actually managed to grow revenue?
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  Yes. One bright spot, their rental income from investment properties,
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  that's part of their property holding business, that actually went up.
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  It increased by $0.9 million, or about 11.4%, reaching $0.9 million.
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  Interesting. What drove that? That was mainly thanks to new income streams kicking
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  in, specifically the retail podium at Millennium Waterfront Plot E1,
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  which they finished building in May 2024.
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  So that started generating rent, providing a nice recurring income boost.
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  OK, so a small positive sign there from their long term holdings. Yeah.
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  Now, given revenue overall was down, it's not a huge surprise that their gross
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  profit also fell right down 15.5 percent to $60.7 million.
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  What does that signal about efficiency? Yeah, it directly ties back to those
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  revenue shifts we just talked about.
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  The lower gross profit from property development, that lines up with the lower
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  volume and, as I mentioned, those lower margins from the brilliance.
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  And similarly, the dip in property financing's gross profit reflects that smaller
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  Chinese loan book and also lower margins they were getting from their Australian loans this period.
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  But I guess the rental income helped a bit. It did.
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  The higher gross profit from their rental properties and actually also from
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  hotel operations, despite the slight revenue dip, helped to offset some of those declines.
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  It really underlines, again, how that diversification across segments provides
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  a bit of a cushion when one area faces pressure. Okay, this brings us right
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  back to that central puzzle then.
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  Revenue down, gross profit down.
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  Yet profit before tax somehow managed to increase by 2.9%. This has to be where
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  those associates and joint ventures really flex their muscles.
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  This is absolutely the core of the story for this half.
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  The share of after-tax profit of associates in joint ventures,
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  that figure just exploded. It saw a massive $20.8 million increase compared to last year.
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  Wow. Yeah, it jumped from $6.5 million in 1H 2024 all the way up to $27.3 million in 1H 2025.
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  That's the engine that drove the overall profit increase. Okay,
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  so what were the big contributors within that? A couple of key things.
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  They had higher handover volume from a joint venture project called TimeZone.
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  Plus, they saw the very first, the maiden handover from another project, Egret Bay.
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  So new income streams from JB's coming online. Right. And critically,
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  there was a really significant S9.3 million dollar profit contribution from NSINV.
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  NSINV, remind us. That's a Dutch real estate investment company.
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  FSGL increased their stake and reclassified it as an associate back in September
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  2024. So this is a major contribution flowing through from that investment now. Got it. Any other...
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  Bits helping the profit line? Yes. A couple more things boosted the bottom line.
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  They booked S4.0 million dollars in other gains, which came from selling their
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  equity in something called East Sun No. 1.
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  And they also managed to reduce their selling expenses by S2.2 million dollars
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  compared to last year. So lower costs helped, too.
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  So it's a combination. Massive JV contributions, a gain on disposal,
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  and trimming some costs. That paints a picture.
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  Exactly. While their direct sales were under pressure, these other strategic
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  elements absolutely pulled their weight, and then some. Okay.
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  Now, for a global company like FSGL, there are always other financial currents
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  swirling around, right?
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  Things like foreign exchange movements, maybe one-off items from previous years.
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  Did anything like that significantly impact the profit picture this time? Oh, absolutely.
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  Foreign exchange and the derivatives they used to manage it had a really complex,
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  almost like a push-pull. How so? Okay, so first, the euro.
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  It strengthened quite a bit against the Singapore dollar during this period.
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  Now, you might think strong euro, good news, but because of how they hedge using
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  financial derivatives, this actually led to a S63.8 million dollar decrease
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  in the unrealized mark-to-market gain on those euro derivatives.
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  Unrealized gain, meaning it's on paper, not actual cash yet. Exactly.
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  Mark-to-market means valuing an asset at its current market price,
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  even if you haven't sold it.
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  Because the euro got stronger, the value of these hedging instruments went down
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  on paper, which negatively impacted the reported profit.
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  It's an accounting effect of the hedge. Okay, that's counterintuitive, but makes sense.
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  What about other currencies? Well, on the flip side, the Chinese yuan,
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  the CNH, actually weakened against the Singapore dollar.
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  This had the opposite effect. It resulted in a S67.2 million dollar increase
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  in the net unrealized mark-to-market gain on their CNH financial derivatives.
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  So a positive impact on the profit line from that side. Wow.
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  So big swings from currency hedges pulling in opposite directions.
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  Anything else major? Yes, a couple more points. Their net finance costs,
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  basically interest expenses minus
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  interest income, went up by S1.2 million dollars, or about 5.4 percent.
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  This was mainly because they had higher average borrowings outstanding during the period.
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  Also, as their development projects get closer to completion,
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  they can capitalize less interest.
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  Capitalize, meaning adding the interest cost to the project's value instead
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  of expensing it immediately. Correct.
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  So more interest hit the profit and loss statement directly this period,
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  although they did mention this was partly offset by lower interest rates,
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  which helped a bit. OK. And the one off items. Right.
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  There was a significant item missing this year compared to last.
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  In 1H 2024, they booked a $10.2 million fair value gain.
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  That was a one-off related to reclassifying the Millennium Waterfront plot E1
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  retail podium from being a development property to an investment property.
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  Since that didn't happen again this year, its absence created another kind of
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  headwind when comparing profits year on year. Okay, so a really complex mix,
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  JVs powering profits, but offset by lower direct margins.
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  Complex FX effects, higher finance costs, and a missing one-off gain.
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  It's definitely nuanced. Very much so. Not a simple story at all.
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  Let's shift gears slightly then and look at their overall financial position, the balance sheet.
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  You mentioned total assets were down slightly, cash was down,
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  but total debt actually went up.
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  What were the big moving parts there? Yeah, those shifts really reflect their
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  ongoing strategic activities, investing in partnerships, developing properties,
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  and managing their debt.
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  One of the biggest movers was interest in Associates and joint ventures,
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  that line item increased substantially by S-151.5 million dollars.
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  That's a big jump. What went into that? It shows their continued commitment to these partnerships.
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  A large chunk, 129.2 million dollars, was due to capitalizing advances they
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  made to the Kingsman Residence joint venture.
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  They also injected more equity into other projects like Sydney House and the
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  Meridian Hotel in Frankfurt.
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  Plus, they bought more shares in NSINV, that Dutch company, for about $22.9
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  million and increased their stake in an office property called Zuterhof AIA for S4.3 million.
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  So lots of investment flowing into those associate and JV structures.
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  Okay. And on the asset side, what about their own development properties?
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  That also increased by $62.5 million.
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  The main driver here was consolidating the Fangang project onto their balance
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  sheet, which added $98.2 million alongside ongoing development work on other
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  sites. Right. And you mentioned receivables went down.
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  Yes. Current trade and other receivables decreased quite significantly,
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  but S-247.4 million dollars.
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  This was largely linked to those Kingsman residents' advances being capitalized,
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  basically moved from being a receivable to an investment in the JV and also
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  the elimination of the Fangang project loan from receivables when it was consolidated. Got it.
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  And the debt increase. Loans and borrowings went up by S-48.9 million dollars overall.
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  This was mainly because they issued S-128.0 million dollars in new notes.
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  Basically borrowing more money through bonds.
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  However, they also redeemed S-78.0 million dollars of older notes during the
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  period, so the net increase was smaller.
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  And what about cash flow? Where did the money actually move?
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  In simple terms, they used cash in their day-to-day operations,
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  s 8.9 million dollars used and for
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  investing activities s 33.0 million
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  dollars used they actually generated cash from financing activities
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  s 9.7 million dollars generated mainly from
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  that increase in borrowings so you can see the pattern investing in projects
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  and associates funding ongoing developments and managing their debt structure
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  that's where the cash went okay that provides a solid snapshot of their financial
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  footing now let's look ahead what's the outlook for their property development
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  side especially thinking about china where market sentiment has been, well,
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  pretty subdued for a while. Are they changing tack there?
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  They acknowledge the weak sentiment and subdued pre-sales in China, definitely.
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  But FSGL seems to be playing a longer game there. They specifically mention
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  they're generally not resorting to significant price cuts to chase sales.
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  That suggests they have confidence in the underlying value of their assets and
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  perhaps the holding power to wait for better market conditions.
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  Patient approach, then. What about specific projects in China?
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  Most of their projects under construction there are actually completed now.
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  The main one's still ongoing as Central Mansion, and they're targeting completion
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  for that later this year. A potentially interesting strategic move relates to their Fengang project.
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  Instead of developing it all themselves, they're planning a public land tender
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  for it. How would that help?
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  The idea is it could potentially lower their overall or blended land cost for
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  the site, allowing them to develop the remaining part in a way that's maybe
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  better aligned with current market realities or perhaps bring in partners.
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  Okay, strategic flexibility. What about outside China, Netherlands, Australia?
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  In the Netherlands, they have quite a bit going on. The Dreeftorne residential
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  tower hit a temporary construction snag, but restarted in June 2025,
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  so completion is now pushed back a bit to late 2026.
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  The office tower next to it should finish construction late this year,
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  2025, but they're delaying actual occupation until mid-2026,
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  likely just as a precaution or to finalize tenant fit-outs. Any new big projects starting?
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  They've got major redevelopment plans for the Muir Park area.
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  Urban planning for that is expected in the first half of 2026,
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  with the actual redevelopment kicking off hopefully in the first half of 2027.
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  And another project, the Prince Hendricade renovation, has had its timeline
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  extended slightly to early 2026, sounds like, to ensure quality.
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  And down under in Australia.
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  Their Sydney House project seems to be ticking along nicely.
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  They report it's progressing well and still on track for completion around the middle of 2027.
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  So yeah, a mix of steady progress on existing sites and some strategic adjustments,
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  especially in China. Okay.
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  Now, thinking about their property holding segment, the part generating that
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  recurring rental income, you mentioned European income was a bit weaker due
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  to the La Meridie and Frankfurt refurbishment.
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  What's the broader strategy there to boost that stable recurring income?
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  That seems pretty crucial. Absolutely.
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  And they are actively investing capital to do just that. They've got several
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  projects aimed at enhancing asset value and income potential.
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  The Puccini Hotel in Milan, for instance, is expected to complete its refurbishment late this year.
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  We already mentioned the Driftoren and Prince Hendrikade projects in Amsterdam
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  progressing. And the Frankfurt Hotel. That's a big one.
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  The Lameridian Frankfurt is undergoing a major renovation. They're fully refurbishing 80 rooms.
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  And crucially, they're actually adding 19 new rooms to the hotel's inventory
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  over the next 18 months or so.
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  That directly increases its future earning capacity.
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  More rooms, more potential revenue. Makes sense.
• 15:33
  Exactly. And they're even looking into adding 15 new rooms at another hotel,
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  the Bilderberg Garden Hotel in Amsterdam.
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  So you set a clear pattern of investing CapEx to upgrade and expand their European
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  hotel assets to drive future recurring income.
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  And beyond hotels, you mentioned NSI and Seiderhoff earlier. Right.
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  The increased stake in NSINV up to 25.7% is a significant strategic move.
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  Even though NSI reported a net loss recently due to asset impairment,
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  FSGL increasing its investment signals a strong belief in NSI's long-term potential,
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  especially considering NSI's own refinancing efforts and development pipeline.
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  And the Zeiderhof I-Office property.
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  That's another key strategic acquisition, buying an additional 17% to bring
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  their stake up to 50%. What's really important here is its location,
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  right next door to their big Meir Park redevelopment project in Amsterdam.
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  So potential synergies there. And the building itself. They've secured the existing
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  tenant for a new 10-year lease covering 80% of the space starting in August 2026.
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  That lease kicks in after a major refurbishment costing around $17 million.
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  So it should be a high-quality, income-generating asset.
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  And as a real sign of commitment, FSGL is actually moving its own European headquarters
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  into that building. That is a statement.
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  What about property holding in China? In China, their Chengdu Wenjing hotels
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  faced lower revenue, reflecting the softer economy there.
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  However, they managed to achieve higher EBITDA, that's earnings before interest,
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  taxes, depreciation, and amortization, which suggests good cost-control measures were effective.
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  And on the retail side, that Millennium Waterfront E1 podium we mentioned earlier,
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  they've now leased out 78% of it, securing long-term income,
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  which is a very positive development for recurring revenue.
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  Okay, so a lot of activity aimed at strengthening that recurring income base,
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  both in Europe and China.
• 17:22
  Now, shifting to property financing again, you mentioned challenges in China,
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  including a defaulted loan. That sounds like a potential headache.
• 17:29
  How are they handling that? They are definitely being cautious with financing
• 17:32
  in China right now. Now, regarding that specific defaulted loan,
• 17:35
  it was for RMB 375.8 million.
• 17:40
  They've taken legal action through the Shanghai courts. Has there been any progress?
• 17:43
  Yes. While the borrower missed the repayment deadline, which means penalty interest
• 17:47
  is now accruing, FSGL has managed to recover some funds.
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  They received a partial repayment of RMB 165.3 million initially,
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  and then another RMB 49.1 million subsequently.
• 17:59
  So they're getting some money back, but still a shortfall.
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  But crucially, FSGL stated they remain confident they can recover the full outstanding
• 18:07
  amount through the court enforcement process. What makes them so confident?
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  Their confidence seems based on the collateral they hold against the loan.
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  This includes a high-rise building and 28 loft apartments.
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  They believe these assets have sufficient market value and liquidity.
• 18:21
  Importantly, these assets are under court preservation orders,
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  meaning the bearer can't sell or dispose of them. They're effectively frozen
• 18:30
  by the court, securing them for potential enforcement action by FSGL.
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  So while it's a process they have to go through, they seem to have a clear legal
• 18:38
  path and valuable security backing the remaining debt.
• 18:42
  Okay, that context is important.
• 18:44
  Finally, let's touch on risk management. Foreign exchange is a constant factor
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  for a global player like FSGL.
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  How are they managing that currency risk going forward? They reiterated their
• 18:56
  strategy, which involves substantial hedging for their main foreign currency exposures.
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  That's the euro, the Chinese yuan, CNH, and the Australian dollar.
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  They primarily use foreign currency denominated debt and financial derivatives
• 19:09
  to try and offset their asset exposures.
• 19:11
  We saw earlier that this leads to those mark-to-market swings in the profit
• 19:14
  and loss statement. Exactly.
• 19:16
  Those unrealized gains or losses, like the big opposite swings from the euro
• 19:20
  and CNH hedges we discussed, They show up in the income statement due to accounting rules.
• 19:25
  It can make profits look volatile even if the underlying cash position isn't
• 19:28
  changing dramatically from the hedges themselves.
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  So are they sticking with that strategy? Yes.
• 19:33
  The board stated they continuously monitor the situation. And despite those
• 19:37
  P&L fluctuations, they still find the current hedging strategy appropriate for
• 19:41
  managing their economic risk.
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  Of course, they remain vigilant to any sudden sharp market moves.
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  An overall financial health message. The overarching message from the company is positive.
• 19:52
  They emphasize their strong balance
• 19:54
  sheet and significant amount of unused committed credit facilities.
• 19:57
  They feel this positions them well financially, not just to weather ongoing
• 20:02
  geopolitical and economic uncertainties, but also to potentially seize any good
• 20:07
  business opportunities that might pop up.
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  And any word on dividends for shareholders? Yes, they announced an interim dividend.
• 20:13
  The board approved a tax-exempt cash dividend of 1.1 Singapore cents per share
• 20:18
  for the financial year 2025.
• 20:20
  That's consistent, the same amount they paid out in the previous year.
• 20:24
  OK, so pulling it all together then, what's the big picture here?
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  FSGL's first half of 2025 seems like a really compelling story of maybe strategic
• 20:33
  resilience. I think that's a good way to put it.
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  You had some traditional revenue streams like property development sales facing
• 20:39
  clear headwinds, but their strategic choices, particularly the investments in
• 20:44
  associates and joint ventures, really came through and significantly boosted the bottom line profit.
• 20:50
  So it really highlights the value of having that diversified model,
• 20:53
  doesn't it? And actively managing that portfolio. Absolutely.
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  It shows how they can navigate a complex global market dealing with,
• 21:00
  say, a slower Chinese property market in one area while simultaneously investing
• 21:05
  heavily in hotel upgrades in Europe.
• 21:07
  Agility and those strategic partnerships seem key.
• 21:11
  This deep dive really underscores how these global real estate companies balance
• 21:14
  very different local challenges, doesn't it?
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  From managing project timelines in the Netherlands to dealing with loan defaults
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  in China, all while trying to build long-term value through acquisitions and development.
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  It really does. And maybe the thought to leave you with is this.
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  What does FSJL's experience this half tell you about where the real value is
• 21:33
  created in today's global property game?
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  Is it purely about the direct buying, selling, and building?
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  Or is the sophisticated management of partnerships, financing,
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  and portfolio diversification becoming just as, if not more, critical?
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  That's definitely something to chew on. Food for thought indeed.
• 21:50
  Join us next time on The Deep Dive for more insights into the stories behind the numbers.