Q2 fair-value gain lifts Perennial; group upbeat on China healthcare

Singapore

PERENNIAL Real Estate Holdings, which recently led a consortium to consider the en bloc sale of AXA Tower for at least S$1.65 billion, on Tuesday reported a surge in its second-quarter net profit to S$17.1 million from S$0.6 million a year ago.

The rise in earnings was mainly due to a fair-value gain of S$16.6 million from the revaluation of Xi'an North High Speed Railway Integrated Development Plot 4, said Perennial.

Perennial is also capitalising on its competitive advantage in healthcare in China as it remains bullish about prospects there.

Earnings per share for the three months ended June 30, 2017, Q2 17 stood at 1.03 Singapore cents, up from 0.04 Singapore cent a year ago.

Pua Seck Guan, CEO of Perennial, said at a media briefing that the company did consider expanding in healthcare in Singapore but experienced certain difficulties such as existing "good market players", labour constraints, and government regulations that only allowed 32,000 sq ft of AXA Tower's space to house medical suites, assuming that the deal goes through.

Currently, Perennial's first and only healthcare business in Singapore is a joint venture with the Beijing Hospital of Traditional Chinese Medicine to set up Ming Yi Guan in Penang Road, which was first announced in June this year.

"At one stage, I was thinking of using AXA Tower to build a big medical centre. There's a constraint and very little scope in Singapore to do medical because the supply of space is limited," Mr Pua said. He added that Perennial had plans in AXA Tower to sell or lease the medical suites as clinics as "the value of the clinics is a lot higher than ordinary offices".

Perennial's revenue for Q2 2017 was down 25.9 per cent at S$17.9 million, largely due to lower project management fees as well as the absence of revenue from TripleOne Somerset from the deconsolidation following the divestment of a 20.2 per cent equity stake on March 31, 2017, but partially offset by a one-off divestment fee received in respect of TripleOne Somerset.

The remaining 30 per cent stake held in TripleOne Somerset is now recognised under the share of results, Perennial said.

Perennial's H1 2017 net profit was S$55.8 million, up from S$9.1 million the year before. The increase was largely due to the divestment of the 20.2 per cent equity stake in TripleOne Somerset and net fair value gain from Xi'an Plot 4, which was partially offset by lower share of results from joint ventures and higher finance cost. Revenue for H1 2017 stood at S$38.1 million, down 28.9 per cent from a year ago.

In China, Perennial has set up healthcare specialist centres in Shanghai and Beijing. The St Stamford Plastic Surgery and Aesthetic Hospital, Perennial International Specialist Medical Centre at PIHMH, and AND Maternal and Child Health Centre are expected to commence operations in Q4 2017, making it Perennial's first foray into Chengdu.

On whether it is redeploying capital back here from Chinese projects, Mr Pua said: "We will look at redeploying (when) opportunities give us good returns. Singapore is getting very tough in these last few months. We wish to find more opportunities in Singapore. We're excited for what we've bought in UE."

Last month, it was announced that Perennial led a consortium with Yanlord to acquire a 33.5 per cent stake in United Engineers Limited (UEL), triggering mandatory offers for the remaining shares in UEL. The consortium also acquired a 10 per cent stake in WBL Corporation Limited (WBL) and may acquire another 19.9 per cent stake in WBL subject to certain conditions.

Perennial closed trading at S$0.90 on Tuesday, down one Singapore cent, or 1.1 per cent.