Tuesday, November 29, 2016

Perennial Real Estate Holdings - Increases stake in Chinatown Point

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 full- year 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.

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