Health and wealth go together
- Maintain BUY, TP unchanged at S$1.30
- PREH partners with Boai Medical Group to acquire a hospital business in Guangzhou for S$63m
- Strategic investment in a new asset class will drive synergies with existing property development arm
Entering healthcare.
- PREH announced that it has formed a 40/60 JV with Guangdong Boai Medical Group to acquire, develop and manage hospital and medical services businesses in China.
- At the same time, the JV announced the acquisition of Modern Hospital Guangzhou, an operational medical business in Guangzhou for 12x EBITDA (average of FY14-15F) PREH’s share of investment is Rmb287m (S$63m).
- This JV and proposed acquisition is PREH’s first foray into a non-real estate related business, and marks its entry into the Chinese healthcare market.
Mutually beneficial synergies with PREH’s integrated projects.
- While this JV may appear unrelated to PREH’s principal real estate business at first glance, we are very positive about the synergies that can be created with the Group’s property development business in China.
- By leveraging on the expertise and network of doctors of Boai Medical Group, one of the largest private hospital/medical services operators in China, PREH will be able to benefit from the still nascent but rising demand for private healthcare in China, and incorporate medical facilities into its integrated development projects.
- In this vein, the Group is actively repositioning Perennial Dongzhan Mall as a predominantly healthcare cum retail integrated development, and has already received expressions of interest for >90% of healthcare NLA.
Maintain BUY, TP S$1.30.
- We view this acquisition as more of a strategic investment for the long term, rather than a near term earnings driver.
- We like the stock for its potential to realise value of c.S$4.2bn embedded within its land bank of integrated developments.
- At current price, the stock is trading at >50% discount to RNAV, which is cheap relative to other property developers in Singapore.
- Maintain BUY, with TP of S$1.30 pegged to a 40% discount to RNAV of S$2.16.
(Rachael TAN, Derek TAN)
Source: http://www.dbsvickers.com/
