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Perennial Real Estate Is Trading At A 52-Week Low – The Three Ways The Company Makes Its Money

Perennial Real Estate Holdings Limited (SGX: 40S) is an integrated real estate and healthcare company.

As a real estate owner, developer and manager, Perennial focuses on large-scale mixed-use developments. It has a presence in China, Singapore, Malaysia and Ghana. It is also a healthcare services owner and operator, focussed predominantly on China.

The company recently appeared on my 52-week low list.

Company EBIT breakdown:

perennialebit

 

 

 

 

 

Source – 2015 annual report

The company breaks down its profits into three main segments, namely, Singapore, China and Management business.

Singapore:

This is the biggest segment within the group in term of Earnings Before Interest and Tax.

The Singapore segment comprises mainly income producing projects located in downtown civic district, central business district and the Orchard Road precinct.

Here, Perennial’s strategy is to acquire properties or land plots that can be repositioned or redeveloped to create value (property development).

In addition, Perennial will selectively acquire completed operational assets which will augment its stream of recurring income and provide further income stability (property investment).

China:

In this segment, there are two different businesses within the group, namely, real estate and healthcare.

Real Estate:

In the real estate business, the company’s strategy is to:

    1. Acquire and develop large-scale mixed-use development projects in first-tier and second-tier provincial capitals and major cities.
    2. Adopt strata sale / long-term hold strategy to better manage fund flows. In other words, the company plans to sell up to 50% of the area developed and own the remaining for investment purposes.

The portfolio of assets owned or under development include Chengdu East High Speed Railway (“HSR”) Integrated Development, Xi’an North HSR Integrated Development, Beijing Tongzhou Integrated Development, Shenyang Longemont Integrated Development and Zhuhai Hengqin Integrated Development, as well as Perennial Jihua Mall in Foshan and Perennial Qingyang Mall in Chengdu.

Healthcare:

In the healthcare business, Perennial’s strategy is to

  1. Introduce healthcare real estate as part of its integrated real estate development. An example of this is the Perennial International Health and Medical Hub as part of the Chengdu East HSR Integrated Development.
  2. Form partnerships with healthcare operators to provide healthcare services. Here, the healthcare business services include medical, hospital, eldercare and senior housing, and maternal and child health management. Example of partnerships are Modern Hospital Guangzhou in Guangzhou, the St. Stamford Plastic Surgery and Aesthetic Hospital and the Chengdu Xiehe Home in Chengdu.

Management business:

This segment includes asset and retail management, project development, project and design management, as well as investment advisory services.

In summary, there are many moving parts that investors should consider. But by breaking down the income of Perennial, investors can have a better overview of the whole company.

This might help them form a better judgement on the long-term prospects of this company.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.