August is the month where we see listed companies in Singapore announcing their financial results for the first half of the year, with some companies also conducting analyst briefings to share more about their results with analysts and the financial media.
One such company that we attended an analyst briefing for was Straits Tradings (SGX: S20), an investment company with stakes in real estate, hospitality, resources, and investments that span the Asia Pacific Region.
Founded in the 1880s, Straits Trading was once the world’s largest tin producer, and it still owns a majority stake in the world’s third-largest tin producer today – Malaysia Smelting Corporation Berhad. However, the company is better known today for its diversified property portfolio which includes Straits Real Estate, ARA Asset Management, and its stake in Far East Hospitality Holdings.
For 1H2021, Straits Trading saw its profit after tax and non-controlling interest at $122.6 million, with earnings per share at 30.1 cents. The company is currently trading at a price-to-book value of 0.769.
In this week’s edition of 4 Stocks This Week (yes, we don’t always cover 4 stocks each week), we look at some key highlights that we learned from the Straits Trading 1H2021 analyst briefing. You can access the slides from the analyst briefing here.
#1 Straits Real Estate Is Now A Wholly Owned Subsidiary Of Straits Trading
As of April 2021, Straits Real Estate, the investment vehicle that seeks out real estate opportunities on behalf of the group, has become a fully owned subsidiary of Straits Trading. This was after the group acquired a 10.5% stake from a family office for $105 million.
As a global real estate private equity investor, Straits Real Estate seeks out various investment properties across the Asia Pacific Region with the aim of generating returns from its property investments. The company currently have Invested Asset that is worth about $2 billion across China, Japan, Malaysia, Korea, UK and Australia.
Since 2016, return on equity (ROE) for Straits Real Estate average about 10% p.a.
#2 ARA Asset Management Proposed Merger Is Worth $1.14 Billion To Straits Trading
On 4 August 2021, ARA Asset Management, which itself was once a public-listed company on the SGX before its privatisation, announced that it would be looking to merge with ESR Cayman Limited to form the largest real estate and real asset manager in Asia Pacific with an AUM of US$129 billion.
This means that Straits Trading, which currently owns about 19% of ARA, will see its stake worth about $1.14 billion if the proposed merger goes ahead.
#3 Hospitality Remains A Challenging Segment
Straits Trading owns about 30% stake in Far East Hospitality Holdings, a regional hospitality owner and operator with a sizeable overseas network of about 18,000 rooms under management over 105 hotels and service residences across 9 countries.
Not surprisingly, with international travel pretty much coming to a standstill since the start of the pandemic, the hospitality segment remains challenging for companies. According to Straits Trading, the hospitality segment saw an EBITDA loss of $5.1 million for 1H2021, which is an increase from the $4.9 million loss sustained in 1H2020.
#4 Launch Of The Straits Trading Shareholders’ Club
One interesting initiative launched by the group earlier this year is the Straits Trading Shareholders’ Club. This is essentially a shareholder-only club that allows the company to connect directly with its shareholders. According to the company’s management during the analyst briefing, it would enable the company to have direct contacts with its shareholders during a period where meetings and physical events are not possible due to COVID-19.
As a member of the Shareholders’ Club, members can expect to gain access to private events for members, experiential journey, and expert insights on investing. We can expect more information and details to be released about the Shareholders’ Club in the future.
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4 Stocks This Week is not a recommendation from us to buy or sell any of these stocks. For investors who are keen to find out more, you should continue researching about them before making your investment decisions.