SINGAPORE (Nov 9): DBS is maintaining its “buy” rating on Perennial Real Estate Holdings with $1.05 target price given the stock currently trades at 0.5x P/BV, offering upside as it gradually realises its RNAV potential.
Apart from property, Perennial Real Estate has also built a portfolio of medical and healthcare services to leverage on rising healthcare demand in China and Singapore.
To recap, Perennial Real Estate posted strong 9M17 results with a net profit of $73 million vs $9 million in 9M16, boosted by gains from bargain purchase of UE and gains recognised in 1H17.
See: Perennial's 3Q earnings surge to $16.9 mil on one-off gain by associate
During the quarter, Perennial Real Estate’s strata sales of TripleOne Somerset saw an increase by 82% q-o-q to $39 million while Renshoutang, its eldercare homes division, opened two new facilities in Zhenjiang and acquired two new homes in Shanghai. Perennial Real Estate also increased its stake in Chinatown Point to more than 50%.
DBS says it is one of two brokers with coverage on Perennial Real Estate whose hidden gems lie in its vast integrated projects in strategic locations across the main transportation hubs in China though these have lengthy gestation periods.
“Our target price is based on a 50% discount to RNAV to factor in potential execution risks and long development/gestation period,” says analyst Rachel Tan, “We have assumed a marginal contribution from its new healthcare venture.”
Shares in Perennial Real Estate are trading at 88 cents or 0.5 times FY18 forecast book.
