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Symphony optimistic despite COVID travel hit

Symphony optimistic despite COVID travel hit – Symphony International Holdings has announced results for the year ended 31 December 2020. The NAV attributable to the ordinary shares on 31 December 2020 was US$0.7384 per share. This represents a 24.70% decline over the NAV per share of US$0.9805 at 31 December 2019. The change is predominantly due to a decline in value of Symphony’s interest in Minor International Pcl (MINT). Travel restrictions and social distancing measures have had a severe impact on MINT’s hotel, restaurant and retail businesses. The company thinks that it will take more time for regular travel to return to support higher hotel occupancies.

During 2020, Symphony reduced its interest in MINT and generated proceeds of US$74.3m. Additional sales in 2021 have generated a further US$20.89m. MINT’s restaurant business, which stood at 2,370 outlets at 31 December 2020, fully recovered in the third quarter of 2020 and posted year-over-year growth in the fourth quarter. Reduced dine-in sales at restaurants were partially compensated for by MINT’s digital platform that drove delivery and take-away sales across brands. An improvement in MINT’s share price since the year end adds about 4 cents to Symphony’s current NAV.

The Liaigre Group luxury furniture brand was hit by showroom closures. Chanintr, another lifestyle business, focused on distributing high-end US and European furniture brands and compatible kitchen & bathroom systems in Thailand, experienced disruptions to its showroom business and its peripheral restaurant operations during the year due to the pandemic related restrictions and political demonstrations. It is now also offering luxury designed turnkey residences. The Wine Connection Group performed well, with year-over-year growth in sales in Singapore, including same-store-sales growth, with some weakness in Thailand that improved towards the latter half of the year. Investments in its digital strategy over the past few years positioned the business to cater to online orders and deliveries.

Indo Trans Logistics Corporation, Vietnam’s largest independent integrated logistics company, reported softer than expected revenue during 2020, but profitability was in line with pre-pandemic budgets. During the third quarter of 2020, it completed the acquisition of a 55% interest (increasing its total shareholding to 97%) in South Logistics Joint Stock Company (“SoTrans”), a Vietnamese inland port & container depot operator and sea freight forwarder with extensive real estate assets.

Symphony’s education-related businesses experienced some disruption in 2020, but there was no impact on financial performance. WCIB International Co. Ltd, which operates the Wellington College International Bangkok, an addition to the UK-headquartered Wellington College schools, had to adapt quickly to forced closures that began in March 2020 – shifting to online classes. Operations returned to normal in September and new enrolments are ahead of expectations. WCIB is now developing buildings and facilities for its Senior school.

Creative Technology Solutions, which provides customised IT solutions to schools predominantly in the Middle East, won contracts to provide remote and digital learning solutions to students at a number of government funded schools and separately, to provide digital books and other solutions to higher education institutions.

In India, ASG Hospital Private Limited, a full-service eye-healthcare provider, experienced a virtual standstill in operations in April but has since recovered. ASG initiated cost reductions at the onset of the pandemic and introduced a telehealth platform to continue to engage with patients in need of care. Group revenues for this business recovered to pre-pandemic levels in September and double digit year-over-year growth in October. Management have reported that the business continued to see strong growth in January and February 2021 compared to the same period a year earlier, which is promising. Symphony completed the second tranche of its investment in ASG and the company is in the late stage of discussions for two acquisitions and separately, partnership programs to expand its offering to more remote regions.

Soothe Healthcare Private Limited, a feminine hygiene products manufacturer and distributer, experienced a sharp slowdown in sales of its Paree and Pariz branded hygiene products beginning in late March, but recovered more quickly. Soothe has leveraged its expertise and distribution capability to launch a diaper brand, Super Cute’s, which has been met with early success. Total sales for Soothe in December 2020 were more than double the same period a year earlier and management have reported the strong growth continuing into 2021. Symphony has been working closely with Soothe on its funding requirements and provided additional financing during 2020, together with Soothe’s largest shareholder, to support the ongoing rapid growth of this business.

The sale of approximately 50% of the land site held by Symphony’s Niseko joint venture resulted in distributions to Symphony of US$16.73m (more than 1.5 times cost). Development of part of the land with Hanwha Hotels & Resorts is progressing slowly in the current environment, but demand for apartment units and land in Niseko, Japan is said to be strong. Minuet Limited continues to hold approximately 34 hectares of land in Bangkok, Thailand. It distributed US$12.86m to Symphony from the proceeds of land sales. Other real estate investments in Thailand include SG Land Co. Ltd, which holds the leasehold rights to two office buildings in downtown Bangkok, and a luxury villa in Phuket. SG land continues to provide an attractive yield and regular distributions to Symphony.

The resort and luxury villas that are branded and managed by One&Only Resorts in Desaru, Malaysia (see picture) was officially launched in September. Despite travel restrictions at the time of opening, the resort was well received within the local travel market and occupancy levels were above expectations. Bookings continue to be strong however, occupancies have varied because of government movement control orders in response to the pandemic. There is strong interest from local and international buyers for luxury villas on the property, which sales are expected to provide incremental value to Symphony in the coming years.

Symphony made a new investment in an innovative businesses called August Jewellery Pvt Ltd, the holding company for online gold fast-fashion jewellery brand, Melorra. Melorra is seeking to disrupt the significant Indian traditional jewellery industry by adopting just-in-time manufacturing techniques and targeting the rapidly growing body of millennial women with high fashion, everyday wear, jewellery. This business did experience a slow down during the early stages of the pandemic but has since recovered and shown strong growth in tandem with its marketing initiatives. Although Melorra’s principal focus is operating through an online platform, it also intends to open a series of “experience centres”, essentially retail outlets designed to reinforce the brand building process. Melorra opened its first retail outlet earlier this year to complement its online sales and become an omnichannel brand.

Another early stage and innovative technology related business is Smarten Spaces Pte. Ltd, a Singapore based Software-as-a-Service business focused on space and employee management solutions for commercial and industrial properties. Smarten continues to grow its client base and now counts many leading Singapore & multinational corporations amongst its customers. Growth has been accelerated with the launch of a suite of products catering to social distancing and resource planning for working from home and office. Smarten’s products are currently deployed in over 40 cities across 13 countries.

Symphony made a small commitment to Good Capital Partners, an early stage technology focused fund & Fund Manager. It  also took a small interest in the General Partner. During 2020, Good Capital made investments in three new companies and one follow-on investment and is exploring a number of new additional investments to add to the fund. At 31 December 2020, the fund had deployed just over 40% of committed capital across seven companies in less than two years, which is indicative of the access to strong deal-flow in the Indian technology eco-system. Good Capital is working with angel investors on earlier stage and higher risk opportunities while opening co-investment opportunities to limited partners on larger, high-conviction investments. Symphony expects Good Capital to supply us with interesting later stage investment opportunities as some of their early stage investments come to the market for additional rounds of financing.

[Morningstar reckons that Symphony is trading on about a 44% discount to NAV. It has an interesting collection of businesses but COVID-related problems with MINT’s hotels and restaurant business are holding it back. A resumption in international travel could make a big difference.]

SIHL : Symphony optimistic despite COVID travel hit

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