Latest Earnings From Perennial Real Estate Holdings Limited: Big Drop In Profit Seen

Perennial Real Estate Holdings Limited (SGX: 40S) released its second-quarter earnings last Friday. The reporting period was for 1 April 2016 to 30 June 2016.

As a brief background, Perennial is an integrated real estate and healthcare company. Perennial’s focus is on large-scale mixed-use developments and it sources revenue from China, Singapore, Malaysia, and Ghana. The company also provides healthcare services in China and these services include medical, hospital, eldercare and senior housing, and maternal and child health management.

With that, let’s look at the company’s latest earnings.

Financial highlights

The following’s a quick summary of some of the financial figures for the reporting quarter:

  1. Revenue for the quarter came in at S$24.1 million, down 38.7% from the same quarter a year ago.
  2. Profit attributable to owners tumbled by 93.2% to come in at S$0.59 million.
  3. Earnings per share (EPS) followed suit, dropping 92.6% from 0.54 Singapore cents a year ago to 0.04 Singapore cents.
  4. Perennial’s net asset value (NAV) per share also exhibited a decline as it moved down from S$1.70 in the second-quarter of 2015 to S$1.57.
  5. As of 30 June 2016, the company’s net debt to equity ratio is 0.59, a big step up from the 0.41 seen at end-June 2015.
  6. Free cash flow came in at S$10.5 million (operating cash flow of S$10.6 million and capital expenditure of S$109,000). This is higher than the previous year when free cash flow stood at a positive S$1.5 million (operating cash flow of S$1.5 million and zero capex).

Operational highlights

Perennial attributed its revenue decline to two main issues. First is the absence of a one-off acquisition fee in the quarter. Second is lower rental revenue from TripleOne Somerset; the mall did not renew expiring leases “in preparation for the asset enhancement works and strata sale.”

The road ahead

In the earnings release, Pua Seck Guan, Perennial’s chief executive, had shared some words on the company’s future plans. This is what he said:

“Despite the relatively weak market sentiment, strata sales at TripleOne Somerset has started to gain momentum with the first few office units sold at a reasonable price of above S$2,600 per sq ft. We intend to intensify our strata sale efforts at TripleOne Somerset and AXA Tower, while balancing the leasing commitments at these properties to ensure a stable stream of recurrent income.

Our integrated real estate and healthcare business strategy is starting to take shape in China, particularly at Chengdu East HSR Integrated Development, where Perennial International Health and Medical Hub and Chengdu Xiehe International Eldercare and Retirement Home will start contributing to the top line next year.

With the elevation of Beijing Tongzhou District’s status as the new sub-centre of Beijing, Beijing Tongzhou Integrated Development is well-poised to benefit from the tremendous growth in the district, further driving the asset’s value creation upside versus its book cost.

As we intend to strengthen our position as an integrated real estate and healthcare company in China, we are actively pursuing suitable opportunities that can add to or deepen our existing business lines in both real estate and healthcare.”

At last Friday’s market close, Perennial’s shares were trading at S$0.90 each and has a price to book value of 0.57.

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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 Esjay does not own shares in any companies mentioned.