First Sponsor Group Delivers Resilient 3Q2025 Performance Amid Market Headwinds; Successful Loan Recovery & Strategic Project Progress Could Move Shares

Key Points from First Sponsor Group’s 3Q2025 Interim Update

• PRC Property Development: Sales remain weak but most projects are completed, lowering cashflow risk. Sydney House Residences in Australia launches pre-sales with “satisfactory results”.
• European Portfolio: Operating income grows slightly, driven by office segment. Refurbishment disruptions at Le Méridien Frankfurt (LMF) offset gains, but future recurring income is set to rise with completion of major redevelopments.
• Financial Strength: All 2025 credit facility refinancings completed; 2026 facilities largely refinanced. Balance sheet remains robust, hedging strategy mitigates FX risk.
• Property Financing: Full recovery of RMB191.1m principal and RMB5.6m interest on defaulted PRC loan; IRR of 14.1% p.a. achieved.

Detailed Analysis: What Investors Need to Know

1. PRC Property Development – No Meaningful Sales Uptick, But Risk Reduced

The Group’s China property sales remain subdued due to persistent weak market sentiment. However, most projects are completed, sharply reducing cashflow pressures. This prudent management enables First Sponsor to take a long-term approach to sales, without forced discounting or fire sales. Notably, the 95%-owned Primus Bay and 46.6%-owned Exquisite Bay (both in Dongguan and Guangzhou) have completed construction and begun handover of sold units, although sales rates (27% at ASPs of RMB22,100–22,900 psm) remain low. Shareholders should note that unsold inventory does not currently pose a financial threat, but continued market weakness could impact future valuations.

A significant positive development is the launch of pre-sales for Sydney House Residences in Australia (241 premium apartments, 39.9%-owned), part of the larger Sydney House project including a luxury hotel and retail spaces (both 90.5%-owned). The pre-sale, launched in late September 2025, showed “satisfactory results” and the project is on schedule for 3Q2027 completion. This diversification into the Australian market provides new growth avenues and reduces reliance on the PRC property cycle.

2. European Portfolio – Operating Income Grows, Future Upside After Major Refurbishments

First Sponsor’s European property holding segment delivered slightly higher operating income of €14.9m in 3Q2025 (up 1.3% YoY), mainly due to stronger office performance. Excluding Le Méridien Frankfurt (LMF), which suffered disruptions from a major refurbishment, income would have been 6.3% higher at €15.3m. With the refurbishment of the 80-room Palais Wing at LMF now completed (mid-October 2025), and ongoing redevelopment of the Puccini Hotel Milan, Dreeftoren Amsterdam, and Prins Hendrikkade Amsterdam slated for completion by FY2026, recurring income is poised for a marked uplift.

Investors should watch for upside when these projects come online, especially as delays in power grid connections for Dreeftoren are being actively mitigated. The Puccini Hotel Milan (59 rooms, Hilton Tapestry Collection) is set for completion late 2025/early 2026, which will add a high-profile asset to the portfolio.

3. Robust Financial Position and FX Hedging

The Group’s hedging strategy (covering € / CNH / AUD exposures) resulted in a mark-to-market loss due to currency appreciation, but this was offset by translation gains on foreign currency-denominated assets, leaving shareholders’ equity unaffected. All 2025 credit facility refinancings are done, with significant progress on 2026 facilities. This strong liquidity and balance sheet position means First Sponsor is well-equipped to weather geopolitical and economic volatility, and to seize acquisition or development opportunities.

4. PRC Loan Book – Full Recovery of Defaulted Loan, Strong IRR

A major positive for shareholders: the Group fully recovered the principal (RMB191.1m) and all associated interest (RMB5.6m) on a previously defaulted PRC loan. This followed legal action commenced in December 2024 and resulted in an internal rate of return of 14.1% p.a. since the initial disbursement. All preservation orders and mortgages over the collateral property have been lifted. This outcome demonstrates strong risk management and recovery capability, which could boost investor confidence and valuation multiples.

5. European Hotels – Mixed Trading, but Cost Controls and New Room Additions

Despite improved occupancy across the hotel portfolio (up to 78.9% in 3Q2025), overall revenue and EBITDA dipped due to LMF refurbishment. Excluding LMF, EBITDA for 3Q2025 and 9M2025 would have been 7.3% and 9.0% higher, respectively. Dutch Bilderberg hotels and Utrecht Centraal hotels outperformed, driven by higher occupancy, cost efficiencies, and payroll savings from self-serve lounge rollouts. This innovation and operational discipline may support higher margins going forward.

A further boost is expected from the reopening of the Palais Wing and potential addition of new rooms at LMF, pending building permit approvals.

6. NSI N.V. Investment – Portfolio Restructuring, Vacancy Rises

NSI, First Sponsor’s associated company, increased like-for-like net property income 5.2% YoY to €44.7m, but saw vacancy rise to 9.8% due to major lease terminations. NAV per share fell 4.8% after dividend payments and negative revaluations, but EPS is up 4.8% YoY. Investors should monitor for further asset disposals and their impact on income and NAV.

7. Other Notables – Retail Podium in Chengdu and Lease Profile Strength

The Millennium Waterfront E1 retail podium in Chengdu is 77% leased, with active tenant engagement underway. The Dutch office and European leased hotel portfolio maintains a WALT of 6.4 years and 93% occupancy, supporting income stability.

Why This Update May Be Price Sensitive

• Successful loan recovery (with strong IRR) removes a major risk overhang and demonstrates management’s operational strength.
• Completion of refurbishments and new projects (Sydney House, Puccini Hotel, Dreeftoren, etc.) will materially boost recurring income and asset value over the next 12–24 months.
• Financial strength and liquidity positions the Group to pursue acquisitions or new developments during market dislocation, potentially delivering outsized returns.
• Innovative cost management (self-service lounges, payroll savings) is likely to improve hotel margins, especially as disruptions subside.

Conclusion

First Sponsor Group has delivered a resilient performance in 3Q2025, managing market and operational risks adeptly, successfully recovering defaulted loans, and progressing strategically important developments. The completion of refurbishments and new assets, backed by a strong balance sheet, sets the stage for medium-term earnings growth. Investors should watch upcoming project completions and operational performance for potential upside catalysts.

Disclaimer

This article is for informational purposes only and does not constitute investment advice. Investors should consider their own circumstances and conduct further research before making investment decisions. Forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from those projected herein.

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