Perennial Real Estate Holdings - CIMB Research 2016-11-29: Increases stake in Chinatown Point

Perennial Real Estate Holdings - CIMB Research 2016-11-29: Increases stake in Chinatown Point PERENNIAL REAL ESTATE HLDGSLTD 40S.SI

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.

Maintain Add

  • 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.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | 2016-11-29
CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.110 Same 1.110