Perennial's profit dives on higher costs, lack of fair value gain

Singapore

HIGHER finance costs and the absence of a fair value gain took a toll on results for real estate developer Perennial Real Estate Holdings for its fiscal second quarter ended June 30.

Net profit plunged 74.9 per cent to S$2.2 million, from S$8.6 million a year ago, mainly due to higher net finance cost attributed to higher interest rates and additional loans to fund new investments.

Moreover, interest expenses in respect of the Perennial International Health and Medical Hub (PIHMH) in Chengdu previously capitalised, were expensed off on completion of the project, the company said.

Earnings per share (EPS) for the quarter stood at 0.13 Singapore cent, down from 0.52 cent for the year-ago period. Revenue rose 52.4 per cent to S$27.6 million, mainly attributable to contributions from Capitol Singapore and PIHMH for the full three months of Q2 2019, as well as higher fee income from the group's management business. Parts of PIHMH began operating in June 2018.

Finance costs were up 54.1 per cent at S$31.8 million while other income fell 98.8 per cent to S$476,000, mainly due to the absence of fair value gain from the revaluation of PIHMH.

For the six months ended June 30, the group posted a net loss of S$24.8 million, versus a profit of S$13.8 million in the same period last year. This translated to a loss per share of 1.49 Singapore cents, from an EPS of 0.83 cent previously. Revenue for the half-year period increased 58.7 per cent to S$52.5 million.

Looking ahead, Perennial noted that the repositioning of retail in Capitol Singapore is on track and expected to complete by Q3 this year. It added that its assets such as Qingyang and Foshan in China have been performing well, while PIHMH's performance is expected to ramp up with the scheduled opening of Gleneagles Chengdu Hospital in the third quarter.

"Our focus on driving operating performance in H1 2019 has seen Capitol Singapore's transformation taking shape with over 90 per cent committed occupancy, 111 Somerset's office strata sale gaining good momentum, and the Singapore office portfolio registering a strong tenancy rate," Perennial CEO Pua Seck Guan said. "The fine-tuning of the operating model at PIHMH, our first integrated real estate and healthcare signature project in Chengdu, has also yielded positive results with all of the medical spaces fully taken up."

Perennial shares rose 3.4 per cent to S$0.605 on Wednesday.