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Perennial Q4 profit slides 42% to S$16m on higher finance costs

HIGHER finance costs took a toll on Perennial Real Estate Holdings' fourth-quarter earnings, as net profit fell 42 per cent to S$16 million, even as revenue rose by almost 44 per cent.

Earnings per share (EPS) for the three months ended Dec 31 shrank to 0.96 Singapore cent, from 1.66 Singapore cents a year earlier, the real estate and healthcare player announced on Wednesday before the market opened.

As at 3.25pm on Wednesday, Perennial shares were trading at S$0.65 apiece, down 1.53 per cent, or one Singapore cent. 

The board has proposed a cash dividend of 0.4 Singapore cent per share, to be paid out on May 22 for FY2018, with book closure on May 3. This pales in comparison to the annual dividend of one Singapore cent for the previous financial year. 

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Finance costs for the quarter rose 63.9 per cent to S$29.1 million with the consolidation of Capitol Singapore's debt, along with new loans to fund investments and rising interest rates, Perennial said. 

In March last year, the mainboard-listed company announced that it would buy out co-owner Pontiac Land Group affiliate Chesham Properties, to become the sole owner of Capitol Singapore, for some S$528 million. 

Separately, Perennial added that interest expenses previously capitalised were expensed off upon the completion of construction works for Perennial International Health and Medical Hub (PIHMH) in Chengdu.

Revenue rose 43.6 per cent to S$23 million, mainly attributable to higher management fees, as well as revenue from Capitol Singapore and PIHMH, which started contributing since the second quarter of 2018. Additionally, The Capitol Kempinski Hotel opened on Oct 1 last year, and is gradually ramping up its operations, Perennial said.

Committed occupancy at the PIHMH which opened in June 2018 is also strong at 91 per cent, as more tenants have commenced operations, the company noted. 

For the full-year, Perennial's net profit fell 22.2 per cent to S$78.1 million, as revenue inched up 5 per cent to S$78.2 million. EPS came in at 4.7 Singapore cents, down from 6.02 cents in FY2017.

Besides the higher finance costs, earnings for fiscal 2018 were also lower due to the absence of a S$55.7 million gain from the divestment of TripleOne Somerset in the year-ago period. 

As at end-December, Perennial’s net debt to equity ratio stood at 0.72 times, higher than the end-2017 ratio of 0.57 times.

Net asset value per share fell to S$1.644 as at Dec 31, from S$1.663 a year ago, mainly attributable to the depreciation of the yuan, the company said. 

Looking ahead, the group is seeking to drive the operating performance of PIHMH, accelerate the growth of its medical and healthcare-related business in China, as well as reposition Capitol Singapore as a retail mall by enhancing its tenant mix with brands that are new to Singapore. 

Said Perennial's CEO Pua Seck Guan: "FY2018 marked a new and exciting chapter on many fronts ranging from the launch of PIHMH, acquisition of two new HSR (high speed railway) projects in Tianjin and Kunming by the Perennial-led healthcare joint venture, to the acquisition of the remaining 50 per cent stake in Capitol Singapore to take full ownership of the prime property."

He added that PIHMH is now an operating model of Perennial's HSR regional healthcare and commercial hub, which the group will fine-tune and replicate in Xi’an, Tianjin and Kunming.