SINGAPORE (Jan 4): DBS Vickers Securities is reiterating its “buy” on Perennial Real Estate Holdings with a $1.05 price target given the research house is positive on its medium- to long-term development plans.
This comes after the announcement last night of a Perennial-led consortium closing its first capital commitment to develop US$1.2 billion ($1.61 billion) worth of integrated healthcare property mixed developments in China, to be linked up by the upcoming high speed railway (HSR) network.
Perennial holds a 45% stake in the joint venture vehicle Perennial HC Holdings, with the remaining stakes held by Shun Tak Holdings (30%), Bangkok Bank (10%), a subsidiary of BreadTalk Group (5%), an investment vehicle of Kuok Khoon Hong (4%), S1F (4%) and a subsidiary of Wilmar International (2%).
See: Perennial-led consortium sets up US$1.2 bil JV to develop high-speed railway linked mega healthcare developments in China
In a Thursday report, lead analyst Rachel Tan notes that Perennial’s investments in China, including its healthcare hub, are now slowly coming into fruition despite potential near-term financial risks.
Tan sees the move as one that could potentially increase the group’s “firepower” to US$2 billion, based on an estimated debt to equity level of 60%, to scale up its integrated real estate and healthcare business with an equity contribution of just US$540 million.
She also views the joint venture vehicle as a potential asset-light platform for Perennial’s two existing platform for its two existing HSR healthcare-integrated projects in Chengdu and Xi’an, while also enabling the group to build its recurring income platform from asset or property management fees.
“Once again, Mr Pua [Perennial’s CEO] continues to get support and strength from its stakeholders and like-minded partners within the industry to invest and expand into development assets with growth opportunities in the future,” comments Tan on the news of Perennial HC Holdings closing its first capital commitment.
As at 11.27am, shares in Perennial are trading 1 cent higher at 90 cents or 111 times FY18 forward earnings.
