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Perennial posts S$26.9m Q1 net loss on higher costs, absence of one-off gain

HIGHER finance costs and the absence of a one-off gain dampened results for real estate developer Perennial Real Estate Holdings in its first quarter ended March 31.

It fell into the red, posting a net loss of S$26.9 million, from net profit of S$5.1 million in the preceding year.

Revenue leapt 66.3 per cent to S$24.9 million from the previous year. Perennial attributed this mainly to three reasons: revenue from Capitol Singapore which was consolidated since May 2018, revenue from Perennial International Health and Medical Hub (PIHMH) as parts of it began operating in June 2018, as well as higher fee income from its management businesses.

The consolidation happened because Perennial Real Estate Holdings last year bought Pontiac Land affiliate Chesham Properties' 50 per cent stake in Capitol Singapore.

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Cost of sales was at S$15.4 million, nearly 2.5 times of the year-ago quarter, because it included the operational costs of Capitol Singapore and PIHMH. The hotel component of Capitol Singapore started operating in early 2019. 

Earnings before interest and tax (EBIT) fell 80.9 per cent to S$4.66 million, because 1Q 2018 EBIT included a one-off gain recognised by one of its associates Yanlord Perennial from acquiring WBL shares. Excluding this, EBIT would be higher by 43.6 per cent, mainly attributable to higher contribution from management businesses.

Finance costs rose 76.8 per cent to S$30.9 million, due to higher interest rates and increased borrowings, as the group consolidated Capitol Singapore's debt and took on additional loans to fund investments, and finance costs previously capitalised for the construction of PIHMH were expensed off following the completion of the project.

Perennial made a loss per share of 1.62 Singapore cents, from earnings per share of 0.31 Singapore cent in the previous year. 

The group expects to be profitable in 2Q 2019 post-completion of its recently announced divestment of Chinatown Point Mall.

Capitol Singapore has a to-date total committed occupancy of 84 per cent and expects to achieve over 90 per cent by 3Q 2019.

Perennial also plans to make use of the government's CBD Incentive Scheme to incorporate office, hotel and residential components at AXA Tower. AXA Tower could enjoy an uplift in gross plot ratio of about 46.5 per cent to 1.55 million sq ft from changes in plot ratio guidelines and the incentive scheme.

In China, total committed occupancy for PIHMH increased to about 92.8 per cent as at March 31, and its anchor tenant Gleneagles Chengdu Hospital is expected to start operations in 2H 2019.

Perennial Real Estate Holdings closed unchanged at S$0.64 on Tuesday before the announcement was made.