Perennial Q2 profit halves to S$8.6m with Capitol fully consolidated

PERENNIAL Real Estate Holdings' second-quarter net profit halved to S$8.6 million from S$17.1 million a year ago as it fully consolidated debt and costs of Capitol Singapore and recognised lower fair value gains in China.

On a per-share basis, profit for the three months ended June 30 fell to 0.52 Singapore cent from 1.03 Singapore cents a year earlier, the property developer announced on Friday before the market opened. Perennial stock closed at 81 Singapore cents on Thursday. No dividends were declared.

For the first six months of the year, net profit fell 75.3 per cent to S$13.8 million, or 0.83 Singapore cent per share, partly due to the absence of a year-ago one-off gain from the partial divestment of TripleOne Somerset.

Second-quarter revenue grew 1.6 per cent to S$18.1 million as it fully consolidated revenue from Capitol Singapore with effect from May 2018. In China, the Perennial Qingyang Mall in Chengdu and the Perennial Jihua Mall in Foshan also performed better, while the Perennial International Health and Medical Hub (PIHMH) contributed a new stream of revenue with its June 2018 launch.

Cost of sales almost doubled to S$9.5 million from S$4.9 million, however, due to property maintenance expenses of Capitol Singapore and the opening expenditure and property maintenance expenses of PIHMH.

The consolidation of Capitol Singapore's debt and additional loans taken to fund new investments pushed finance costs up 42.1 per cent to S$20.7 million for the quarter, further weighing on the bottom line.

Perennial's net debt to equity ratio stood at 0.74 times as at end-June, higher than the end-2017 ratio of 0.57 times. Net asset value per share grew to S$1.704 as at June 30, from S$1.663 a year ago.

Looking ahead, Perennial said it plans to rejuvenate Capitol Singapore with new tenants. It will also continue its strategy of strata sales and asset enhancement for AXA Tower and TripleOne Somerset, and pursuing aquisitions or land tenders to grow the Singapore portfolio. In China, the developer said it will focus on developing existing projects.

Chief executive Pua Seck Guan said in a statement: "With the opening of PIHMH in Chengdu and the full ownership of Capitol Singapore, our focus is now on optimising these landmark developments to deliver a good stream of annuity income. While we continue to build up our high-speed rail portfolio in China, we will concurrently adopt an active portfolio reconstitution strategy to recycle capital from our Singapore and China assets to maximise capital efficiency."