SINGAPORE (Feb 9): CIMB is reiterating its “add” call on Perennial Real Estate Holdings (PREH) with a target price of $1.12.
This came on the back of the group announced that its 4Q17 earnings increased by 7.9% to $27.6 million from $25.6 million last year, bringing FY17 earnings to $100.3 million, almost trebling from $35.1 million last year.
However, revenue declined by 25.7% to $16.0 million from $21.5 million last year, mainly attributable to the absence of revenue from TripleOne Somerset as a result of the deconsolidation following the divestment of a 20.2% equity stake in March 2017.
See: Perennial posts 7.9% rise in 4Q earnings to $27.6 mil
Revenue from the group’s properties in Singapore made up 27% of revenue and 44% EBIT in FY17, driven by rental income from CHIJMES as well as strata sales of units at TripleOne Somerset (TOS) and AXA Tower (AXA).
Meanwhile, the group’s operations in China accounted for 44% of its FY17 revenue and 49% of EBIT, boosted by higher income from Perennial Qingyang Mall in Chengdu.
In FY18, the group will continue the strata sales and asset enhancement initiatives (AEIs) at TOS and AXA in Singapore. The group also entered into a settlement agreement to resolve the deadlock for the Capitol project. In China, development activities are ongoing in Beijing Tongzhou, Chengdu and Xian, with completions scheduled to be in phases from 2019F onwards.
In a Thursday report, analyst Lock Mun Yee says, “This should drive forward recurring and development contributions, in our view.”
Within its nascent healthcare arm, PREH says that it will focus on hospitals/medical centres as well as eldercare/senior housing segments as part of its vision to be an international medical services provider in China.
In addition, the group has established a joint venture to invest in healthcare integrated mixed-use developments that are connected to high-speed railways in China.
See: Perennial-led consortium sets up US$1.2 bil JV to develop high-speed railway linked mega healthcare developments in China
“We expect FY18F earnings to benefit from additional rental contributions in China while development contributions are likely to be felt from FY19F onwards,” says Lock.
As at 11.51am, shares in PREH are trading 1 cent lower at 82 cents or 0.5 times FY18 book with a dividend yield of 1.2%.
