Straits Trading Co. Ltd (STC)
Incorporated in 1887, STC is an investment company with stakes in real estate, hospitality, resources and investments across Asia Pacific. STC is invested in subsidiaries Straits Real Estate, ARA Asset Management, Far East Hospitality Holdings and Malaysia Smelting Corporation.
FY 2018 Financial Highlights:
Source: STC FY 2018 Press Release
- STC’s FY 2018 total revenue dropped by 3.7% year-on-year to SGD 456.0 million.
- On the other hand, the company experienced a surge in interest income (+157.3% to SGD 46.0 million) and fair value changes in investment properties (+269.2% to SGD 31.5 million) for the year.
- As a result, STC achieved a 54.5% year-on-year growth in profit after tax and non-controlling interests (PATNCI) to SGD 71.7 million for FY 2018. This is the highest PATNCI achieved by STC since 2014.
- Consequently, earnings per share for the company increased from 11.4 cents in FY 2017 to 17.6 cents in FY 2018.
Source: STC Corporate Presentation March 2019
Performance Drivers (Positive Factors)
- Real Estate Segment
STC’s Real Estate segment comprises the property portfolio, investments in Straits Real Estate, Suntec REIT and ARA Asset Management. The segment recorded a 68.2% year-on-year increase in PATNI to SGD 69.2 million in FY 2018. This increase came on the back of higher interest income from the notes issued by the joint venture, as well as fair value gains from its portfolio in Australia, China, Japan and Singapore. STC also received higher rental income arising from its expanded overseas portfolio in FY 2018.
During the financial year, Straits Real Estate grew its residential portfolio to 10 assets comprising 1,016 apartment units, compared to 612 units across five assets in FY 2017. These quality assets are located near transport nodes and key amenities in Tokyo, Osaka and Saitama, and provide a stable source of recurring rental income for the Group. In addition, Straits Real Estate acquired a portfolio of logistics properties through a new joint venture. To-date, the venture has invested in five properties valued at AUD 137.5 million.
Meanwhile, ARA Asset Management expanded its asset under management from SGD 40 billion in FY 2017 to SGD 80.1 billion in FY 2018. Consequently, ARA Asset Management grew the number of its investments from 11 REITS and 9 private real estate funds in FY 2017 to 20 REITS and over 70 private real estate funds in FY 2018.
- Resources Segment
STC’s Resources segment comprises its 54.8%-owned subsidiary, Malaysia Smelting Corporation. Despite lower revenues, this segment more than doubled its PATNCI from SGD 2.1 million in FY 2017 to SGD 6.7 million in FY 2018. The significant growth was chiefly due to higher profits from sale of by-products, better yields from tin smelting and non-recurring exceptional income.
Meanwhile, STC is making good progress in its efforts to revamp Malaysia Smelting Corporation and improve operational efficiencies in tin smelting. Malaysia Smelting Corporation more than doubled its net profit from RM 16.1 million in FY 2017 to RM 34.3 million in FY 2018, as a result of better performance from its tin smelting segment. The migration of Malaysia Smelting Corporation’s smelting operations to a new plant is in progress and expected to be fully operational by 2020.
Performance Drivers (Negative Factors)
- Hospitality Segment
STC’s Hospitality segment comprises its investments in Far East Hospitality Holdings and Far East Hospitality Trust. This segment experienced a year-on-year drop in PATNCI from SGD 3.2 million in FY 2017 to SGD 0.4 million in FY 2018.
- Exchange Losses
STC suffered higher exchange losses in FY 2018 primarily due to a weaker Australian Dollar arising from its investments in debt instruments.
Source: STC FY 2018 Annual Report