PERENNIAL REAL ESTATE HOLDINGS
40S.SI
Perennial Real Estate Holdings - Superior land bank
Trading at 50% discount to RNAV. Maintain BUY.
- We have a BUY recommendation, with TP of S$1.32 pegged to a 40% discount to our RNAV estimates of S$2.16.
- The stock is currently trading at a 50% discount to RNAV, which in our view would have priced in most uncertainties regarding the group’s ambitious plans to grow its business, especially in China.
Development projects offer huge value unlocking potential
- PREH’s value lies in its global land bank located in China, Malaysia, and Ghana, where it has an attributable development pipeline of c.5m sqft of commercial, retail, hotel, and residential GFA which will be progressively completed from 2016 onwards.
- Earnings are underpinned by a stable portfolio of operational investment properties in Singapore and China, and recurring property management fees.
S$4.3bn of value embedded in land bank.
- The current attributable value of PREH’s development properties on the books stands at S$1.7bn, excluding Ghana.
- In terms of geographical breakdown, China accounts for c.78% of this value, while Singapore accounts for the remaining 22%.When fully completed, we estimate gross development values of S$3.7bn in China, and S$0.6bn in Malaysia.
Valuation:
- We estimate PREH's RNAV at S$2.21 per share, which includes the Penang development.
- Our TP of S$1.32 is based on a 40% discount to factor in the Group's exposure in China, given its limited operating track record there. Note that we have not imputed the Ghana development into our numbers given uncertainty in terms of costs estimates.
Key Risks to Our View:
- Upside to estimates upon more details from Ghana project.
- In April, PREH announced a 55/45 JV with Shangri-La to develop a 1.7m-sqft GFA integrated project in the airport district of Accra, capital of Ghana. Total completion of this acquisition, which is pending master planning approval, could add an additional S$0.06-0.08 to our RNAV estimates.
Derek Tan
DBS Vickers
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Mervin SONG
DBS Vickers
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http://www.dbsvickers.com/
2016-01-06
DBS Vickers
SGX Stock
Analyst Report
1.32
Same
1.32
