Chairman Statement

Chairman Statement

"First Sponsor achieved a record net profit of S$167.1 million for FY2019, an increase of 47.9% over that of FY2018. In recognition of the good results, the Board is recommending a final tax-exempt (one-tier) dividend of 1.6 Singapore cents… an increase of 23.1% over that of FY2018. With a low gearing and ample credit headroom of S$410.2 million… the Group is ready to expand its footprint in existing and new established regions that may offer good opportunities."

Dear Shareholders,

On behalf of the Board of Directors, I am delighted to report that the Group achieved a record net profit of S$167.1 million for FY2019, an increase of 47.9% over that of FY2018. In recognition of the good results, the Board is recommending a final tax-exempt (one-tier) dividend of 1.6 Singapore cents per ordinary share which represents an increase of 23.1% from the final dividend for FY2018. If the proposed final dividend is approved, the total dividend payout for FY2019 will add up to 2.7 Singapore cents per ordinary share. Since its IPO in July 2014, the Company has steadily increased its total annual dividend payout in line with the good performance of the Group.

FY2019 was an eventful year with a number of firsts for the Group. In January 2019, the Group acquired its first hospitality asset in Milan, Italy - a bare shell 65-room hotel located in the heart of Milan city centre, which is in the midst of being converted into a hostel with over 280 beds. Subsequently in June 2019, the Group commenced operations of its first owner-managed hotel, the Hampton by Hilton Utrecht Centraal Station in the Netherlands, which performed well in its first six months of operations. November 2019 then saw the Group entering into its first Australian property development project to redevelop the iconic 125-year old City Tattersalls Club in Sydney. In addition to taking an equity stake of 39.9% in the property development project, the Group expanded on its Australia property financing business via the provision of a A$370.0 million construction financing facility to fund the project. On the PRC property financing front, the Group successfully resolved the Case 1 defaulted loan, maintaining its track record of not having incurred any bad debt loss. The PRC property financing business also achieved a record average loan book of RMB2.2 billion for FY2019, which is a 40% increase over the previous year’s average loan book of RMB1.6 billion.

The year also saw the Group increasing its investment in the Dongguan property development market. In February 2019, the PRC government unveiled the timeline for the development of the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”). As part of the GBA plan, Hong Kong and 10 other cities in the Pearl River Delta area within a two-hour radius of Hong Kong (comprising Macau, Guangzhou, Shenzhen, Zhuhai, Dongguan, Huizhou, Zhongshan, Foshan, Zhaoqing and Jiangmen) will boost collaboration by 2022 in areas including the central pillars of science and technology, intellectual property rights and even ecological conservation. The GBA is envisaged to be developed into a cluster of vibrant world-class cities with an economic system largely driven by innovation by 2035. Given the affirmative vision, the Group is upbeat on the Dongguan residential market and has further increased its Dongguan property development exposure in 2019 with the acquisition of The Pinnacle, Chang’an and the Skyline Garden, Wanjiang (formerly known as Wanjiang Victory Land) projects. Both projects are expected to be launched for pre-sales in the course of 2020. The Group also entered into a property development and financing transaction with the Sunac group in December 2019 which is expected to be completed during the first half of 2020. While the Group is keen to further expand its Dongguan exposure to capitalise on the positive outlook of Dongguan arising from the GBA development plan, the Group is mindful that concerns over Covid-19 may dampen demand for housing in the current year.

In May 2019, the Group successfully completed its second rights issue which raised net cash proceeds of S$146.4 million. This has further strengthened the Group’s balance sheet and has armed the Group with the necessary financial resources to capitalise on any good business opportunities.

Group Performance

The Group recorded revenue and net profit of S$319.2 million (FY2018: S$277.4 million) and S$167.1 million (FY2018: S$113.0 million) respectively for FY2019. Revenue for FY2019 was driven by growth in all of the Group’s three core businesses with the property holding business segment recording close to a 30% increase, underpinned by the Bilderberg Bellevue Hotel Dresden acquired in late March 2019 and its owner-managed Hampton by Hilton Utrecht Centraal Station which commenced operations in June 2019. The property development business segment registered close to a 15% growth as a result of a higher number of residential and commercial units in the Chengdu Millennium Waterfront project being handed over during the year. The Group’s property financing business remained a key contributor to the Group’s profitability, delivering a record high of S$79.7 million in gross profit which accounts for 42% of the Group’s FY2019 total gross profit.

As at 31 December 2019, the total equity of the Group (inclusive of perpetual convertible capital securities of S$146.5 million) amounted to S$1.6 billion. As at 31 December 2019, the Group’s consolidated gross borrowings was S$628.9 million and the Group’s consolidated net gearing ratio based on book value was 0.20 times.

Foreign exchange exposure to RMB remains one of the key risks that the Group faces. Unlike its European and Australian investments which are fully hedged via a combination of local currency-denominated borrowings and financial derivatives such as cross-currency swaps and foreign currency forward swaps, the Group’s RMB denominated net assets remain largely unhedged as the cost of hedging remains prohibitive. However, the Group will continue to monitor the situation closely and adjust its RMB hedging strategy accordingly. RMB depreciated against S$ in 2019 resulting in a translation loss of S$33.3 million recorded in FY2019. As at 31 December 2019, the Group recorded a cumulative translation loss of S$18.6 million (Dec 2018: gain of S$12.9 million) arising mainly from the Group’s exposure to RMB.

Property Development

In FY2019, the property development segment generated a net revenue of S$160.0 million (FY2018: S$139.4 million) and a gross profit of S$78.8 million (FY2018: S$65.7 million). The increase in both revenue and gross profit was due mainly to a higher number of residential and commercial units in the Chengdu Millennium Waterfront project being handed over during the year.

In Dongguan, the Star of East River (“SoER”) and Emerald of the Orient (“EoO”) projects have achieved stellar residential sales results, thereby substantially de-risking both projects.

Star of East River, Dongguan, PRC

All but 5 out of the 1,221 residential units of the SoER project sold were handed over in 2019. 95.1% of the 1,931 SOHO apartments and 74.8% of the 612 office units launched for sale have been sold. In addition, 88% of the 31,000 sq m retail mail, named “首铸。 万科广场”, commenced operations in late September 2019. 97.9% of the operating retail spaces was leased out at the end of 2019. Handover of the SoER project is expected to continue in 2020 and 2021.

Emerald of the Orient, Dongguan, PRC

The sales performance of the EoO project is as impressive with the sale of all 137 villas and 99.2% of 674 residential apartments that were launched for sale, excluding the 180 residential apartments from the remaining block which were recently launched for pre-sale on 20 March 2020. In accordance with the land tender conditions, 31 villas and 222 residential apartments will be retained and will only be launched for sale after the expiry of the required minimum holding period of five years commencing after the housing title certificates are obtained. The pre-sold apartments and villas are expected to be handed over from late 2020/early 2021.

The Pinnacle, Dongguan, PRC

In May 2019, the Group acquired a 60% equity interest in three adjacent plots of mixed use development land in Chang’an, Dongguan. The project named “The Pinnacle”, which is managed by the Group, is expected to comprise eight blocks of 607 residential apartments, 226 SOHO units and approximately 3,000 sq m of retail space which are currently under development. The residential blocks are expected to be launched for pre-sale in 2Q2020. Handover of the project is expected to be carried out in phases from 2021.

Skyline Garden, Dongguan, PRC

Following the acquisition of the 60% equity stake in The Pinnacle, the Group and, among others, a wholly-owned subsidiary of China Poly Group, a PRC-based company listed on the Shanghai Stock Exchange with a market capitalisation of approximately S$34.4 billion as at 23 March 2020, entered into a joint venture to develop the Skyline Garden project located in Wanjiang district of Dongguan, which is approximately 600 metres away from the Group’s SoER project.

The property development project, in which the Group holds a 27% equity stake, has a total GFA of approximately 214,700 sq m and is expected to comprise five residential blocks of 1,163 residential apartments, seven blocks of 1,715 SOHO apartments and 4,400 sq m of commercial space. Development of the project is on track and pre-sale of the residential component is expected to commence from late 2020. In accordance with the land tender conditions, all SOHO apartments and commercial space will be retained and will only be launched for sale after the expiry of a minimum holding period commencing two years after the housing title certificates are obtained.

Approximately four months after the successful land tender of the Skyline Garden site, a mixed use development site adjacent to the Skyline Garden project was sold in a public land tender at a land price of approximately RMB18,500 psm, which is a premium of more than 28% over that of the Skyline Garden project. In addition to the higher land cost, the winning bidder is required to build and return 5% of the residential GFA to the Dongguan municipal as part of the competitive bid terms.

Sunac JV Project, Dongguan, PRC

In December 2019, the Group signed a cooperation agreement with, among others, subsidiaries of the renowned developer, Hong Kong listed Sunac China Holdings Limited, in relation to an ongoing predominantly residential development project in Dongguan. The project comprises approximately 86,000 sq m of saleable residential GFA.

The Group will take a 30% equity interest in the project and extend a property financing loan to finance the property development project. Completion of the acquisition of the 30% equity interest in the project is subject to certain conditions precedent which are expected to be satisfied in 1H2020. The project commenced pre-sale in December 2019 and results have been good.

Millennium Waterfront Project, Chengdu, PRC

The Group has sold and recognised profit from the handover of all 7,302 residential units in Plots A to D of the Chengdu Millennium Waterfront project. While the residential component of the project has a remaining carpark inventory of 3,752 lots, these parking lots are carried at “nil” cost on the Group’s balance sheet. A sale of these parking lots will provide additional value to the Group.

For Plot F, 59.6% of the SOHO loft units has been sold since its pre-sale launch in August 2019. In addition, 156 units were sold to a bulk buyer in mid-January 2020. The development which comprises 15 floors of 807 SOHO loft units and five floors of over 25,000 sq m of saleable retail and commercial space, is expected to be handed over in phases from early 2021.

The Group continues to evaluate its development options for Plot E, the last development plot of the Chengdu Millennium Waterfront project.

City Tattersalls Club, Sydney, Australia

In November 2019, the Group led a consortium of investors in partnering with Australia's ICD Property to redevelop the iconic 125-year old City Tattersalls Club ("Club") in Sydney, marking the Group’s first Australian property development project. Besides holding an equity stake of 39.9% in the project development trust which will undertake the renovation of the Club’s premises and develop the airspace above into a hotel and residential apartments in return for a development fee calculated based on the gross proceeds from the sale of the residential apartments and any other income or gain arising from the residential apartments less certain agreed deductions, the Group will also provide a A$370.0 million construction financing facility to fund the project.

The project has received the approval for its Stage 1 concept development application and construction of the project is expected to start in 2022, assuming a successful Stage 2 development application process during the year.

Redevelopment of Dreeftoren, Amsterdam Southeast, the Netherlands

The Group has obtained an irrevocable building permit to redevelop and increase the net lettable floor area of the Dreeftoren Amsterdam office property by approximately 74%. While the Group had encountered an objection from a neighbouring property owner to the proposed development of an adjacent new 312-unit residential tower on the carpark site of the Dreeftoren office late last year, the objection was recently resolved with the help of the local municipality. The building permit for the residential development has become irrevocable.

Prior to the rapid spread of Covid-19 to Europe, a key risk to the Group’s property development projects in the Netherlands was the rising construction costs due to the strong market demand. The Group will closely monitor the construction market and only commence construction if it is able to secure a construction contract at a reasonable contract price.

Property Holding

The Group’s property holding business segment recorded good double digit growth of 29% and 39% increase in revenue and gross profit to S$71.8 million and S$30.5 million respectively in FY2019. The increase was due mainly to profit contributions from the newly acquired Bilderberg Bellevue Hotel Dresden acquired in late March 2019 and the Hampton by Hilton Utrecht Centraal Station which commenced operations in June 2019.

Income from the Group’s European property portfolio increased by 4.7% in FY2019 to S$62.8 million (FY2018: S$60.0 million), mainly bolstered by the contributions from the delivery of the newly developed Oliphant, the Munthof Amsterdam offices, the Hampton by Hilton Utrecht Centraal Station and the Bilderberg Bellevue Hotel Dresden. The Group expected further growth of its European recurrent income base with the full year contributions from the abovementioned properties, the expected delivery of the Crowne Plaza Utrecht Centraal Station in 2Q2020 and the Dreeftoren Amsterdam office as well as the Puccini Milan youth hostel in due course. However, this positive outlook did not take into account the effects of the Covid-19 pandemic. With the economic uncertainties resulting from the Covid-19 pandemic, the Group believes that this positive outlook will be adversely affected. As at 31 December 2019, the Dutch office portfolio and European leased hotels had a weighted average lease term of approximately 9.6 years.

The Netherlands

The Bilderberg Hotel Portfolio, comprising 11 owned hotels, recorded a gross operating profit (“GOP”) of €18.9 million (S$28.9 million) for the year, a 13% decrease from FY2018 on a “like for like” basis. The 13% decrease was due to additional expenses resulting from the outsourcing of IT and other shared services to the hotel manager with effect from June 2019 in connection with the restructuring of the Bilderberg head office operations. After such outsourcing, certain expenses of the Bilderberg head office operations incurred below the GOP line will no longer be applicable.

Due to the limited availability of contractors and significant cost increase, several capital expenditure programs planned for FY2019 were delayed and will be carried out in FY2020 subject to the Group being able to secure construction contracts at a reasonable contract price.

The Hilton Rotterdam performed consistently with a slight increase in both occupancy and average daily rate that resulted in a GOP increase of €0.1 million (S$0.2 million) to €4.9 million (S$7.5 million) in FY2019.

The 193-room Hampton by Hilton Utrecht Centraal Station traded well with an average occupancy of 77.1% since its opening in mid-June 2019 and achieved a GOP of €1.2 million (S$1.8 million) in FY2019. The Group looks forward to the completion of the 144-room Crowne Plaza Utrecht Centraal Station in 2Q2020 which will also be owner-managed and which is within the same building as the Hampton by Hilton Utrecht Centraal Station.

In relation to the Group’s hotel operations in the Netherlands, the Group intends to avail itself to the applicable schemes implemented by the Dutch government in response to Covid-19, including a wage subsidy scheme pursuant to which an employer can apply for compensation of part of its employee wage costs depending on the loss of turnover, for a period of three months from 1 March 2020, with a possibility for extension for another three months. This will help mitigate the operating costs of the Group’s Dutch hotels. The Group however does not rule out the possibility that it may suspend the operations of some of its Dutch hotels in the future, depending on how the Covid-19 situation evolves.

The newly developed Oliphant Amsterdam office, the net lettable area of which increased by 50% to 21,136 sq m, is 98% leased with a WALT of approximately 9.7 years as at 31 December 2019. The sale by the Group of the Oliphant Amsterdam to its 33%-owned associated company, FSMC, was completed in November 2019. The disposal generated a profit of S$53.3 million while allowing the Group to retain a meaningful stake for future capital appreciation and recurrent income.


The Westin Bellevue Dresden Hotel was rebranded to Bilderberg Bellevue Hotel Dresden with effect from 1 January 2020. The rebranding of the hotel will result in cost savings and further expand the Bilderberg brand in Europe.

Subsequent to its acquisition in March 2019, the Group embarked on a refurbishment program for 326 (out of 340) rooms in the hotel. Work commenced in July 2019 and the first 2 phases involving the refurbishment of 224 rooms were completed in November 2019. The last phase involving the refurbishment of the remaining 102 rooms is currently underway and is due to be completed by April 2020.

To help combat the spread of Covid-19, the State of Saxony implemented a state ordinance pursuant to which lodging shall only be permitted for necessary purposes (excluding touristic purposes). In view of the state ordinance (which will apply at least until 20 April 2020) and as part of the Group’s cost containment strategy, the Group suspended the operations of the Bilderberg Bellevue Hotel Dresden on 23 March 2020. The suspension is expected to continue up to 30 April 2020. The Group will also apply for the applicable economic support packages offered by the German government.


The Wenjiang hotels achieved a 37% increase in GOP underpinned by profitability in both the room and F&B business segments in FY2019. However, the outbreak of Covid-19 in early 2020 has adversely impacted the hotel and hotspring operations. The Holiday Inn Express Chengdu Wenjiang Hotspring Hotel and the adjoining hotspring have suspended their operations since late January 2020 as a precautionary measure to curb the spread of the virus.

Property Financing

On the property financing business front, the Group registered revenue and gross profit amounting to S$87.4 million and S$79.7 million respectively in FY2019. The positive growth was driven by a record PRC average loan book achieved for the year and the recognition of associated net penalty interest income from the resolved Case 1 defaulted loan. The Group maintained its track record of not having incurred any bad debt loss and its PRC property financing loan book stood at RMB2.4 billion as at 31 December 2019.

Subsequent to the disbursement of a A$50.0 million loan in late 2018, secured on a prime income producing property located on Collins Street, Melbourne, the Group further expanded its Australia property financing business footprint in FY2019 as it committed to provide a A$370.0 million construction financing facility to fund the iconic City Tattersalls Club redevelopment project along Pitt Street, Sydney.

In connection with the economic uncertainties resulting from the Covid-19 pandemic, the Group has consented to two borrowers to defer their interest payment for the short term. The Group will closely monitor the performance of its loan portfolio.

Corporate Social Responsibility

The Crowne Plaza Chengdu Wenjiang Hotel, Holiday Inn Express Chengdu Wenjiang Hotspring Hotel and Hilton Rotterdam hotel teams spearheaded several charity, community and environmental events throughout the year.

One of the key highlights for the Wenjiang hotels was the Good Charity Month event. This was a month long initiative where the hotel teams co-organised events with the local communities which included helping out at stray animal abuse shelters as well as donation drives of learning materials and other essential items for schools to help needy children. In addition, the hotel teams hosted the Love Charity Bazaar event that helped to raise donations to the Soong Ching Ling Foundation (“SCLF”). The SCLF is a public welfare foundation established in 1986 which supports a variety of issues related to the welfare of women and children which include mother and child health care.

The Wenjiang hotels were awarded the prestigious ‘Ecology-Efficient Hotel’ title which is officially awarded after a strict audit by the China Tourist Hotels Association.

In the Netherlands, volunteers from the Hilton Rotterdam assisted in planning and executing numerous tours and workshops targeted at students across different age groups. These events provided insights into the different departments of the hotel and its operations. The volunteers also donated sandwiches and cash to various charitable Dutch organizations, and visited high schools in Rotterdam to provide interview training for students. These sessions included role-plays and CV reviews that are aimed to help the students build confidence in future job interviews, presentations and CV preparations.

Besides organising and taking part in such community events, the Group also sponsored the building of an old folks home in a poor rural town in Guangdong province and donated cash and essentials to the local Dongguan authorities to help with the Covid-19 situation.

The Group will continue to support programs that will bring communities together, have a socially and environmentally positive impact, or build and foster business-to-community relationships.

Future Prospects

The Board is pleased with the Group’s record profit achieved for FY2019. We are also cognizant of the need to build sustainable growth and value for our shareholders. Although the recent signing of the “Phase One” trade deal between the US and the PRC marks a good start to 2020, the outbreak of Covid-19, which started in Wuhan and has spread to various PRC cities and other countries, has disrupted economic activities. As there are signs that the control measures implemented by the PRC government have been effective, the Group is cautiously hopeful that the situation in the PRC will improve. With Europe now being the epicentre of the global Covid-19 pandemic and in view of the related travel restrictions and cancellation of large scale events in Europe, the Group expects its hotel operations in the Netherlands and Germany to be impacted. However, as the situation relating to the spread of Covid-19 remains uncertain, it is currently difficult to ascertain the impact it will have on the financial performance of the Group. The Group will closely monitor the situation and provide updates as soon as there are material developments.

The Group’s immediate priority is to ensure the health and safety of its customers and staff at all its properties and will continue to put in place appropriate measures to address this. This also serves as a timely reminder to the Board that the Group must remain prepared for any external adverse factors. It is reassuring that the Group is entering into this uncertain time with a strong balance sheet and banking support. With a low gearing and ample credit headroom of S$410.2 million as at 31 December 2019, the Group is ready to expand its footprint in the regions that the Group has an existing exposure as well as other established regions that may offer good opportunities.


On behalf of the Board, I would like to offer my sincerest gratitude to our shareholders, customers, business associates and partners for their unwavering and continued support. I would also like to thank my fellow Directors for their shared vision, wisdom, experience and guidance and also to the management team and staff for their hard work, dedication and commitment in their efforts to build value for our shareholders. We hope for a successful 2020 and let’s stay united to manage all challenges ahead.

Ho Han Leong Calvin

23 March 2020