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Perennial China Retail Trust Posts Flat 3Q Earnings

PerennialChinaRetailTrustPerennial China Retail Trust (SGX: N9LU), PRCT in short, released its 3rd Quarter 2013 results yesterday after markets closed. Listed on 9 June 2011, PCRT’s vision is to be a reputable and dominant pure-play on China’s retail malls. Two other real estate trusts with considerable exposure to China are Forterra Trust (SGX: LG2U) and CapitaRetail China Trust (SGX: AU8U).

As at 4 November 2013, PCRT has a market capitalisation of approximately S$618.7 million, and its current portfolio comprises of mostly shopping malls which PCRT has a majority interest in. In addition, PCRT is also venturing into railway integrated developments through the access to a strong pipeline of projects from its sponsor.

perennial portfolio assets

Sourced from Perennial’s website under “Portfolio overview”

For the 3rd quarter results, PRCT posted net profit of S$ 6.5 million, down 36.4% y-o-y, compared to the same period last year. This is mainly attributable to the increase in property operating expenses of S$3.1 million where S$2.7 million is incurred from marketing and promotions expenses, pre-operation costs and staff costs in association with the opening of Perennial Jihua Mall.

Nevertheless, the high operating expenses are partly offset by the gross revenue which was from scratch last year. Other contributing factors to the poor results were unrealised foreign exchange losses of S$1.3 million and an increase in net finance costs of S$1.16 million.

Operation Highlights

While the total occupancy for all the assets is showing 76%, considerably lower as compared to Singapore retail malls, the occupancy rate is on an uptrend. There are also a few positive developments happening over the next few years. Perennial Qingyang Mall, Chengdu is expected to open in 1Q 2014 and following that, Dongzhan Mall (also in Chengdu) is likely to commence operations by 1Q 2015.

PRCT is also driving shopper traffic and tenants’ sales through the securing of new prominent retailers and brand names. Moreover, augmented entertainment & children-related trades will give additional reasons for shoppers to visit the malls. As a result, the leasing is likely to continue its growth going forward.

Valuation

Despite the fall in net profits, the distribution per unit (DPU) remains consistent at 0.95 cents for the quarter. The annualized distribution per unit is 3.77 S-cents and it translates to an annualized dividend yield of estimated 7.11% based on the closing price of S$0.53.

Net Asset Value per Unit decreased by S$0.01 from S$0.74 in 2Q 2013 to S$0.73 in 3Q 2013 while its gearing ratio is stands at a comfortable level of 27.96%, slightly below the recommended 30% by the Singapore government.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice.   Motley Fool Singapore contributor James Yeo doesn’t own shares in any companies mentioned.