Perennial Real Estate Holdings - Increases stake in Chinatown Point
- Buys additional 40% stake in Chinatown Point for cash consideration of S$61.8m.
- Price translates to a 5.2% NPI yield, accretive to earnings.
- Maintain Add with an unchanged TP of S$1.11.
Raises stake in Chinatown Point
- PREH announced that it has, together with SPH, acquired 60% of Chinatown Point for a consideration of S$92.6m.
- PREH’s 40% share will raise its existing stake to 45.15%, making it the largest owner of the property.
- Chinatown Point has a 208,798sf retail podium and 4,230sf of strata office space. It has a committed occupancy of 97% and enjoys a strong shopper traffic of 2.4m/mth.
Price translates to a 5.2% NPI yield
- The price was based on an agreed property value of S$442.5m or S$2,077psf and translates to a NPI yield of circa 5.2% in 2016. This valuation is close to our current assumption of S$2,066psf.
Adding another income stream to Singapore portfolio
- We think this transaction will provide another recurrent income stream to PREH’s Singapore portfolio.
- PREH will fund its outlay of S$61.8m with borrowings. This will raise the current debt/equity ratio to 0.64x, from 0.63x as at 3Q16.
- We estimate the additional rental income could boost FY17F net profit projection by 5-6% on a fullyear basis.
- Our target price remains unchanged at S$1.11, based on a 40% discount to RNAV of S$1.85, after factoring in this acquisition and the additional debt funding.
- We maintain our Add call with potential catalysts in FY17 from a further roll-out of its healthcare business and additional income from the Perennial Dongzhan Mall.
- Key risk is a delay or slower-than-expected completion of its China projects.