Portfolio Update

RNS Number : 7861L

Symphony International Holdings Ltd

05 August 2011

 



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

SHAREHOLDER UPDATE

RELEASED 5 August 2011

Symphony International Holdings Limited's ("SIHL" or the "Company") unaudited Net Asset Value ("NAV") decreased from US$403,650,036 to US$401,619,447 between 31 March 2011 ("1Q11") and 30 June 2011 ("2Q11"), contributing to a 0.50% decrease in NAV per share from US$1.1719 to US$1.1660. The change in SIHL's NAV per share outperformed the MSCI AC World (down 0.53%), MSCI Singapore (down 2.1%) and MSCI Thailand (down 1.5%) indices, and underperformed MSCI AC Asia Index (down 0.47%) during 2Q11.

The decline in NAV and NAV per share was primarily due to a weakening of the Thai Baht and the share price of Minor International Pcl ("MINT") on concerns over potential political unrest in the lead-up to the Thai general election at the beginning of July. The Thai Baht and the share price of MINT has since recovered as at the date of this update.

PORTFOLIO SUMMARY

SIHL's NAV was US$401.62 million at 30 June 2011 and consisted of investments in the following segments:

Healthcare: US$53.80 million (13.4% of NAV)

Hospitality: US$96.52 million (24.0% of NAV)

Lifestyle: US$12.13 million (3.0% of NAV)

Lifestyle / Real estate: US$127.93 million (31.9% of NAV)

Temporary investments: US$111.24 million (27.7% of NAV). Temporary investments include cash and equivalents and are net of accounts receivable and payable

SIHL's NAV per share performed better than selected indices since SIHL's initial public offering in August 2007 through 30 June 2011. SIHL NAV has outperformed the MSCI AC World, MSCI AC Asia and MSCI Singapore indices by 32.0%, 34.7% and 36.1%, respectively. SIHL's NAV per share underperformed the MSCI Thailand index by 5.3% during the same period. (Source: MSCI Inc., Company analysis).

SIHL's share price at 30 June 2011 was US$0.78 representing a 33.1% discount to NAV per share. 

SIHL's NAV at 30 June 2011 consisted of listed investments (37.4% of NAV), unlisted investments (34.9% of NAV) and temporary investments (27.7% of NAV). Temporary investments include cash and equivalents and are net of accounts receivable and payable

SIHL's listed investments accounted for 37.4% of NAV at 30 June 2011, down from 37.8% at 31 March 2011. This was primarily due to decrease in the value of Minor International Plc ("MINT") that was partially offset by a gain in the value of Parkway Life Real Estate Investment Trust ("PREIT") during the quarter. On a per share basis, the value of SIHL's listed investments stood at US$0.436. Unlisted investments (including property) comprised a further 34.9% of SIHL's NAV (or US$0.407 per share), with the remaining 27.7% of NAV (or US$0.323 per share) being temporary investments.
 
SIHL's share price continued to trade at a discount to NAV in 2Q11. At 30 June 2011, SIHL's share price was US$0.78, representing a discount to NAV per share of 33.1%. SIHL had temporary investments of US$111.2 million at 30 June 2011.

MARKET OVERVIEW AND OUTLOOK

There was increased volatility in the financial markets in 2Q11, predominantly driven by concern over sovereign risk in the Euro area, persistent weakness in the US housing market and economy and inflation in developing countries. Downside risks to the global economic recovery have heightened since 1Q11 however, the fundamentals for growth remain intact.

The International Monetary Fund ("IMF") kept its global output growth estimates for 2011 largely unchanged (revised down by 0.1% to 4.3%) in its June update to the April 2011 World Economic Outlook. The IMF expects growth to slow in 2Q11 and accelerate during the second half of 2011.

Global economic activity will remain unbalanced going forward. Reduced government spending and austerity measures in the US and Europe will further subdue already weak growth in both regions in the medium to long-term. Most emerging Asian economies on the other hand continue to see robust growth. The IMF forecast real GDP growth of 8.4% for developing Asia compared to 2.2% for advanced economies for 2011.

Inflation in Asia continues to remain a primary concern. Strong domestic demand and capital inflows are causing food, fuel and asset price inflation. Government's in the region continue to tighten monetary policies and are generally allowing some currency appreciation to combat rising prices.

We continue to remain positive on the outlook for Asia and believe SIHL will continue to benefit from strengthening currencies and assets prices in the region over the long-term. We are seeing increased deal flow and are in advanced stages of evaluating a number opportunities.

PORTFOLIO DEVELOPMENTS

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.

Update: Master plans are being finalised for the development of this property. Simultaneously, we have entered into discussions with a local property developer for a potential partial sale or joint development of the site. 

The value of Minuet Ltd at 30 June 2011 was US$98.3 million based on an independent valuation. The change in value from US$99.4 million at 31 March 3011 is predominantly due to a weakening in the value of the Thai Baht. 

Minor International Pcl ("MINT") is one of the largest hospitality and restaurant companies in the Asia Pacific region with 35 hotels and resorts totaling over 4,100 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 1,157 restaurants under The Pizza Company, Swensen's, Sizzler, Dairy Queen, Burger King, Thai Express and The Coffee Club.

Following the restructuring / merger in 2009 with Minor Corporation Public Company Limited ("MINOR"), MINT's operations also include contract manufacturing and an international lifestyle consumer brand distribution business in Thailand focusing on fashion, cosmetics through retail, wholesale and direct marketing channels under brands that include GAP, Esprit, Bossini, Red Earth, Bloom, and Zwilling Henckels amongst others.

Update: MINT's revenue and EBITDA increased by 26% and 19%, respectively, in 1Q11 year-over year. The increase in revenue was driven by growth in almost every business unit and in particular, sales from residential property development and timeshare under the Anantara brand.

EBITDA growth was less than revenue growth primarily due pre-opening expenses associated with the St. Regis Hotel in Bangkok and Anantara Kihavah in the Maldives in addition to marketing expenses associated with the Anantara Vacation Club.

Hotel operations, excluding new hotels, experienced an increase in average occupancy by 3% year-over-year to 64%. The more stable political environment facilitated some recovery in tourist arrivals. The restaurant, retail and trading businesses also saw improvement in business during the quarter year-over-year.

Following the acquisition of 19.96% stake in listed Australian hotel and service apartment operator Oaks Hotels and Resorts Limited ("Oaks") in Q1 2011, MINT made a general offer allowing it to raise its shareholding and subsequently acquire all of the shares outstanding at 29 July 2011. The business will provide MINT with a strong hospitality platform in Australia and New Zealand and enhance MINT's presence in the Middle-East.

The acquisition of Oaks is expected to be cash flow accretive. The cost of investment in Oaks is roughly 7% of MINT's market capitalisation and Oaks is expected to achieve EBITDA for the July-June 2011 fiscal year that is approximately equal to 25% of MINT's fiscal 2010 EBITDA.

At 30 June 2011, the fair value of SIHL's investment in MINT was US$96.5 million.

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 around 5% based on current valuations and historic distributions.

Update: PREIT's gross revenue and net property income increased by 14.1% and 13.3% in 2Q11 year-over-year to S$21.4 million and S$19.6 million, respectively.

The strong growth is attributable to contributions from nursing home properties acquired in Japan mid-2010 and January 2011, as well as higher rent from existing properties.

Under the CPI+1% rent formula for Singapore properties, PREIT will enjoy a 5.3% increase in minimum guaranteed rent for the fifth year of lease term commencing on 23 August 2011.

Distributable income per unit for 2Q11 rose from 2.09 Singapore cents in the same period a year earlier to 2.37 Singapore cents.

At 30 June 2011, the fair value of SIHL's investment in PREIT was US$53.6 million.

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.

Update: SG Land continues to generate stable performance from rental income on its two office towers. We continue to explore redevelopment and asset enhancement approaches in relation to these buildings. Given the more stable political situation in Thailand, we are beginning to explore a sale of this asset.

Based on an independent third party valuation at 30 June 2011, the value of SG Land is US$16.1 million down from US$16.3 million at 31 March 2011. The decline is primarily due to a weakening of the Thai Baht during the quarter

C Larsen Singapore Pte Limited ("C Larsen") is an importer and distributor of high-end U.S. and European furniture brands that include Christian Liaigre, Martha Stewart, Barbara Barry, Baker, Herman Miller, Minotti and Thomasville. The market served by this business is primarily Thailand, but the intent is to grow the business gradually into other parts of Asia.

Update: C Larsen's 2011 performance is slightly above forecasts despite the political unrest in Bangkok in H1 2011. C Larsen is exploring a number of new opportunities in Thailand and other Asian countries. 

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.

Update: AFC completed a rights issue in 2Q11 that was subscribed to by existing investors to fund working capital requirements through 2012. Revenue from subscription and advertising have seen significant improvement in 2011. The Company is presently exploring different options to leverage its competitive advantage in the market.

One Central Residences Macau SIHL invested in four high-end residential apartments in a new development in Macau, which was completed ahead of schedule in August 2009.

Update: The Macau property market continues to remain buoyant and we are currently optimistic that our target sale price will be achievable in the near future. 

Property Joint Venture in Japan SIHL invested in a property development venture in March 2011 that has acquired a hotel in Niseko, Hokkaido, Japan. SIHL has a 30% interest in the property development venture.

Update: Based on a independent third party valuation at 30 June 2011, there has been no change in the value of this investment save for a strengthening in the Japanese Yen. We are currently exploring the possibility of increasing our interest in the venture.

SUBSEQUENT EVENTS

The Company issued 2,059,745 ordinary shares on 4 August 2011, credited as fully paid, to the Investment Manager, Symphony Investment Managers Limited, increasing the Company's fully paid issued share capital from 344,439,211 ordinary shares to 346,498,956 ordinary shares. The shares were issued as part of the contractual arrangements with the Investment Manager. If these shares had been in issue as at 30 June 2011, SIHL's NAV per share would decrease by US$0.0069 per share from US$1.1660 to US$1.1591 per share on that date

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