Portfolio Update

RNS Number : 2805N

Symphony International Holdings Ltd

13 February 2009

 



Not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful.

SYMPHONY INTERNATIONAL HOLDINGS LTD

INVESTOR UPDATE

RELEASED 13 FEBRUARY 2009

OVERVIEW

The financial markets and the global economy, in general, continued to deteriorate in the fourth quarter of 2008. This obviously impacted the net asset value that takes into account the fair value of unrealised investments ('NAV') of Symphony International Holdings Limited ('SIHL' or the 'Company'). Although outperforming the MSCI Thailand and Singapore Indices, which represent markets where SIHL's investments are concentrated, by 10.0% and 11.6% in the fourth quarter, respectively, the Company's NAV fell by 14.9% from US$299,121,788 to US$254,462,611 or from 88.4 cents to 75.2 cents per share.

The continued weakness in markets in Asia and globally was predominantly responsible for the decline in SIHL's NAV during the fourth quarter. We have slowed down the investment process in light of economic uncertainties with only limited incremental investments in certain existing portfolio companies. 

Our investment management team has experienced a number of major credit and economic cycles over the past three decades. Although this down-cycle is more severe than anything we can recall, we believe that SIHL is well positioned to take advantage of opportunities that these conditions will almost certainly give rise to. SIHL's cash resources at the end of 2008 amounted to over US$55 million. The Company's ability to leverage to 35% of its total assets provides the potential to generate additional liquidity, though we remain cautious about using such leverage and have no current plans to do so. 

Most importantly, the businesses in our portfolio are for the most part in relatively good shape, with management teams that have a demonstrated ability to come through difficult economic times.

SIHL's share price performance relative to its NAV has been disappointing. However, we believe that the Company is well positioned to create value in the long-term on the back of an economic recovery. 

PORTFOLIO SUMMARY

As at 31 December 2008, SIHL's NAV was US$254,462,611 and consisted of investments in the following segments: 

Lifestyle / Real Estate: US$ 93,949,961 (36.92% of NAV)

Healthcare: US$39,764,713 (15.63% of NAV)

Hospitality: US$33,137,109 (13.02% of NAV)

Lifestyle: US$29,850,778 (11.73% of NAV)

Temporary investments: US$57,760,049 (22.70% of NAV). Temporary investments include cash and equivalents and are net of accounts receivable and payable.

SIHL's NAV has performed better than selected indices. Since SIHL's initial public offering in August 2007 through to 31 December 2008, SIHL's NAV has outperformed the MSCI AC World, MSCI AC Asia, MSCI Thailand and MSCI Singapore indices by 27.8%, 25.8%, 38.8% and 48.5%, respectively (Source: MSCI Inc., Company analysis).

SIHL's share price at 31 December 2008 was US$0.29 representing a 61.4% discount to NAV on the same date.

PORTFOLIO UPDATE

Note: Portfolio companies are listed in the descending order of the total funds invested or committed

Minuet Ltd is a joint venture between SIHL and an established Thai partner for the development of a branded life-style residential and recreational development in Bangkok, Thailand. SIHL has a direct 49% interest in the venture, the maximum allowable under current regulations, but will be responsible for the design, development and execution of the project. 

Development plans are under review given the current economic uncertainty. However, we believe the property provides good development potential, as per the original transaction rationale. The golf course on this property generates sufficient revenue to cover the costs of a small establishment in Thailand that oversees Minuet Ltd's assets. There is no debt on the property. In keeping with SIHL's valuation policies, this investment has been valued at cost despite a higher independent third party valuation.

Minor International Pcl ('MINT') is one of the largest hospitality and restaurant companies in the Asia Pacific region with over 27 hotels and resorts totalling over 3,000 rooms under prominent brands such as the Four Seasons, Marriott, Anantara and others in Thailand, Vietnam, Maldives and South Africa. MINT also owns and operates over 1,042 restaurants under The Pizza Company, Swensen's, Sizzler, Dairy Queen, Burger King, Thai Express and The Coffee Club. 

MINT's 3Q08 revenues increased 25% YoY on strong performance from its restaurant and property businesses. MINT and Minor have announced a plan of restructuring / merger pursuant to which MINT will issue 1.14 of its shares in exchange for every Minor share in issue. The restructuring / merger is aimed at streamlining and strengthening the business operations of MINT and enhancing value for MINT and Minor shareholders. MINT also recently announced a dividend of 0.23 Baht per share. 

Parkway Holdings Limited ('Parkway') is Asia's leading healthcare company and operates three hospitals in Singapore as well as radiology, laboratory and primary healthcare businesses. Parkway also has an extensive Asian footprint with operations in Malaysia, India, China and Brunei. Parkway also has a 35.5% interest in the Parkway Life Real Estate Investment Trust. 

Parkway's share price has remained weak because of general turmoil in the markets, concerns over Parkway's new-build hospital in Singapore and near-term demand for elective medical services. However, our view is that Parkway has good longer-term prospects given its strong position as an industry leader in S.E. Asia. Parkway's group revenues and profit before extraordinary items grew by 11% and 5%, respectively, during the first three quarters of 2008 compared to the same period a year earlier. 

Parkway Life Real Estate Investment Trust ('P-REIT') invests in income generating healthcare-related properties in the Asia-Pacific region including the buildings of Parkway's three Singapore hospitals, which are leased back to Parkway on long leases. P-REIT is established and managed by Parkway Holdings Limited and generates an inflation-linked yield of more than 8% based on current valuations and historic distributions.

The price of P-REIT shares has remained depressed and volatile, reflecting negative sentiment towards real-estate stocks in general. P-REIT's 4Q08 net property income grew by 35.7% compared to the same period a year earlier. We believe P-REIT has defensive characteristics in view of its inflation-linked (with a minimum floor) rental stream from the Parkway hospitals. However share price recovery will be dependent on an eventual sector re-rating. 

SG Land Co. Ltd ('SG Land') is a joint venture company that owns the leasehold rights for two office buildings in downtown Bangkok - SG Tower and Millenia Tower. The two buildings in SG Land's portfolio have high occupancy rates and offer attractive rental yields. SIHL holds 49.9% of the venture.

SG Land continues to generate stable performance from rental income. Occupancy remains high at SG Land's two office towers and recent lease renewals have exhibited an increase in rental rates. In keeping with SIHL's valuation policies, this investment has been valued at cost despite a higher independent third party valuation.

AFC Network Pte. Ltd ('AFC') is a 24-hour TV channel broadcasting food and lifestyle programming tailored to audiences in the Asia Pacific region. This channel began broadcasting in July 2005 and currently airs in Singapore, Hong Kong, Malaysia, Indonesia and the Philippines. 

AFC has filed for regulatory approval to enter the Indian market. They have also had a successful re-launch in the Philippines and have acquired the rights to produce the Asian version of the 'Iron Chef' which originated in Japan and has been successfully ported to the US market. Viewer ratings in AFC's primary market, Malaysia, continue to remain high.

Minor Corporation Public Company Limited ('Minor') is a leading distributor of international lifestyle consumer brands in Thailand focusing on fashion, cosmetics through retail, wholesale, and direct marketing channels under brands that include Esprit, Bossini, Red Earth, Bloom and Zwilling Henckels. It owns and operates one of Thailand's leading contract manufacturers for regional and global FMCG suppliers.

Minor's 3Q08 profit was up 15% despite a 7% decrease in sales revenue. This performance was due to an increase in dividend income from its holdings in MINT as well as cost reduction efforts in the face of difficult economic conditions. MINT and Minor have announced a plan of restructuring / merger pursuant to which MINT will issue 1.14 of its shares in exchange for every Minor share in issue

C Larsen Limited ('Larsen') operates in Thailand as an importer and distributor of high-end U.S. and European furniture brands that include Christian Liaigre, Martha Stewart, Barbara Barry, Baker, Herman Miller and Thomasville. 

SIHL's investment was originally in the form of a loan. This has been restructured into an investment in the form of redeemable convertible securities that convert to equity based on future performance of the business. Operations are being streamlined to reduce costs and support future growth.

One Central Residences Macau SIHL had invested in four high-end residential apartments in a new development in Macau, which is currently under construction. 

Macau property values have declined as a result of travel restrictions placed on visitors from mainland China. The development is expected to be complete by the end of 2009, as scheduled.

A more detailed investor update is available upon request from the Company or maybe accessed via www.scpal.com. 

For further information, please contact:

Sunil Chandiramani - Symphony Asia Limited ([phone])

The foregoing may contain certain forward looking or forward sounding statements with respect to the investments, prospects and/or liquidity of the Company. Forward looking statements, by their very nature, involve risk and uncertainty, because they relate to circumstances and events that may or may not take place in the future due to the numerous factors that could cause actual events to differ materially from those implied by any forward looking statements. Neither the Company nor its Investment Manager undertake to update any such forward looking statements.

No representation or warranty is made by the Company or its Investment Manager as to the accuracy or completeness of the information contained in this document and no liability will be accepted for any loss whatsoever arising in connection with such information. 

This document is for information purposes only and does not constitute an invitation or offer to underwrite, subscribe for or otherwise acquire or dispose of any securities of the Company in any jurisdiction. All investments are subject to risk. Past performance is no guarantee of future returns. Shareholders and prospective investors are advised to seek expert legal, financial, tax and other professional advice before making any investment decisions.  

This document is not for distribution, directly or indirectly, in or into the United States or any jurisdiction in which such distribution would be unlawful. 

This document is not an offer of securities for sale into the United States. The Company's securities have not been, and will not be, registered under the United States Securities Act of 1933 and may not be offered or sold in the United States absent registration or an exemption from registration. There will be no public offer of securities in the United States.

 

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