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Perennial China Retail Trust’s Profit More Than Doubled

Perennial China Retail Trust (SGX: N9LU) announced its third-quarter result this week. Both revenue and earnings had a huge boost as some properties are only acquired mid of last year and this year.

The Trust recorded a revenue of S$11.7 million for the first nine months of this year, compared to a mere S$1.3 million for last year. This was mainly because Perennial Jihua Mall was only operational for one month till Q3 2013. For FY2014, revenue was recorded for Perennial Jihua Mall and Perennial Qingyang Mall which started operations at the end of April 2014. These are the only two malls that the Trust has full control over. The trust also has 50% interests in Shenyang Red Star Macaline Furniture Mall, Shengyang Longemont Shopping Mall, and Shenyang Longemont Offices. Perennial China Retail Trust also holds a 50% interest in Perennial Dongzhan Mall which it has an option to acquire another 30% interest in the future. Lastly, it holds a 10% interest in Beijing Tongzhou Integrated Development (Phase 1).

The main bulk of the trust’s earnings is still coming from other income which mainly consisted of its drawdowns of earn-out deeds that have been set aside to support earnings and distribution for the trust before the assets mature. The trust has a remaining earn-out amount for the last quarter in 2014 of S$15.5 million left.

With the earn-out gains, the trust was able to boost its net profit to S$29.1 million for the first nine months of the year, more than doubled from last year’s earnings. The trust also maintained its distribution per units of 2.85 cents per unit, giving investors an annualised yield of 7.4%.

Perennial China Retail Trust currently has a gearing ratio of 30.17% with a debt service coverage ratio of 2.24 times. Its weighted average interest rate is at 4.4% and has an average term to expiry of 2.4 years.

General Offer

However, there is a bigger issue brewing in Perennial China Retail Trust. Perennial Real Estate Holdings Limited (SGX: 5NH), which is created after a reverse takeover of St. James Holdings, has offered S$0.70 per units for all outstanding Perennial China Retail Trust’ units. The offer will be fulfilled by new shares in Perennial Real Estate Holdings Limited at an exchange ratio 1 share of Perennial Real Estate Holdings Limited for every 1.91 units of Perennial China Retail Trust. The closing date for the offer is set at 8th Dec 2014. If more than 90% of the unit holders accept the deal, Perennial China Retail Trust will be delisted from the exchange and become a subsidiary of Perennial Real Estate Holdings Limited.

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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 Stanley Lim doesn’t own shares in any companies mentioned.