From an overall business and economic perspective, 2022 started positively with the gradual and welcome easing of Covid restrictions in much of the developed world. However, the upswing in sentiment was soon undermined by the launch of a war in Ukraine, a spike in energy prices and the beginning of a series of aggressive interest rate hikes by the Federal Reserve and other central banks.

The change in monetary stance by the Federal Reserve marked the peak in global equity markets. Through much of 2022, equities, especially those in the technology sectors, saw a significant correction. Bond markets also went into reverse after a 30 year’bull run. At its low point, the market capitalization of the S&P500 Index had shrunk almost US$11 trillion in 2022, while longer term US government bonds saw their biggest price drop in over 200 years. Against this backdrop, the Thai economy and stock market were relatively resilient. The Thai economy saw a modest rebound with GDP growth of around 3%, up from 1.5% in 2021, and the SET index was more or less unchanged over the year with a gain of 0.7%. With the sharp rise in US interest rates, the Thai Baht came under some pressure and dropped 3.5% against the US$ over the year.
While the short term performances of equity and bond markets have little impact on the operating performance of the underlying, core investment positions of FNS Holdings Plc. (“FNS”), underlying financial conditions do impact the ability of the group to access borrowing, the cost of borrowing and the opportunity to monetize investments that are currently unlisted.
In 2022, FNS recorded a consolidated net profit of Bt.104.9 mn which compares with a net loss in 2021 of Bt.42.2 mn. The key drivers of the 2022 financial performance were the disposal of the company’s wholly-owned subsidiary Finansa Securities Ltd.(FSL), the sale of premises and equipment at TISCO Tower and a reduced contribution from Associated Companies. The sale of premises and equipment generated a gain of Bt.298.8 mn and the sale of FSL generated a loss of Bt.125.6 mn. The reduction in the contribution from Associates from Bt.50.9 mn in 2021 to Bt.6.2 mn in 2022 was due primarily to the 2021 earnings including a contribution from the company’s stake in Finansia Syrus Securities Plc., which was sold in late 2021. Associated Company income in 2022 benefited from reduced losses at M.K. Real Estate and Development Plc.(MK), in which the Company has a 31.5% stake.
Following the sale of FSL, the company changed its name from Finansa Plc. to FNS Holdings Plc.
The principal developments in 2022 in terms of business progress were (1) the completion of the company’s transition out of financial services with the sale of the 100% owned subsidiary, FSL, in May (2) the ongoing transition at Associate Company MK, including a strong performance in warehouse construction and leasing, the sale of non-core assets including the Flora Ville Golf Course and the expansion of the RX Wellness integrated wellness platform (3) strong sales growth at Associate Company, Kanom Café Co. Ltd, in which FNS has a 30% stake and (4) satisfactory progress by 50% owned Joint Venture BFTZ Wangnoi Co. Ltd in the construction of a 88,000 sqm distribution centre to be leased by Siam Makro Plc.
As indicated above, short term moves in equity and bond markets do not impact the group’s operating performance, though the underlying factors may impact borrowing costs and opportunities for the group to monetize investments. Going into 2023, global equity markets were in a relatively buoyant mood during January with inflation falling and optimism that Federal Fund Rate would peak mid-year at 5.00 -5.25%. However, the resilience of the US economy as indicated by employment and consumption data raised concerns that the Federal Reserve still had work to do in terms of driving inflation down towards its 2% target and that peak interest rates may be higher than the previous consensus and stay higher for longer. As a result, investor sentiment has deteriorated. With the Federal Reserve firm on bringing down inflation and curbing inflationary expectations, US interest rate rises (and by implication, global interest rate rises) may well surprise on the upside and an economic recession in the US and Europe is still the most likely scenario, though the extent and timing of the recession remain uncertain. This will have negative implications for corporate earnings and dividend payouts. While the onset of a recession will hasten an eventual peaking in interest rates, which will likely spur a move higher in equity and bond markets, it is far from clear how equity markets will perform in the intervening period. A best case scenario is a short, mild recession that would likely see equities moving higher, while a steeper than expected recession could see equities revisiting the lows seen in 2022. The reopening of the China economy in 2023 adds weight to the case for a soft landing for the global economy.
Looking at the positioning of the group, the core investments can be placed in two broad categories. The first is real estate related, which includes the stakes in MK, Prospect Logistics and Industrial Freehold and Leasehold REIT(PROSPECT REIT) and BFTZ Wangnoi Co. Ltd.(BFTZ WN). The second is Private Equity, which include the investments in NEO Corporation Ltd. (NEO) and Kanom Café Co. Ltd.(Kanom). The key drivers of FNS performance in 2023 will be the strategic objectives in place at each of these core investments and a focus on monetizing assets. The role of FNS management is to help facilitate successful execution of these objectives. The objectives include (i) the sale of an additional c.70,000sqm of completed warehousing by MK subsidiary, Prospect Development Ltd.(Prospect), to the PROSPECT REIT in Q1 2023, worth c. Bt1.75 bn (ii) the proposed listing of NEO on the Stock Exchange of Thailand by early 2024 and (iii) continued rapid sales growth at Kanom together with improving profitability. The IPO of NEO will be a significant liquidity event for FNS and in anticipation, FNS management is exploring new investment and business opportunities.
One development in Q1 2023 was the decision to take up the rights units being offered by PROSPECT REIT as part of its purchase of additional assets. The PROSPECT REIT has performed well since its launch in August 2020 with strong cash flows underpinning attractive dividend payouts.
While 2023 could prove to be challenging for the Thai (and global) economy, FNS management is confident that 2023 will prove to be a year of significant progress towards achieving sustainable profitability for FNS.