SINGAPORE (Mar 5): Perennial Real Estate Holdings CEO Pua Seck Guan has raised his stake in the real estate and healthcare company. On Feb 26, Pua bought 117,600 shares in Perennial at 84.69 cents each. This raises his stake from 10.29% to 10.3% — comprising 0.44% in direct shares and 9.86% in deemed shares. The deemed interest arises from his shares in PSG Holdings and PREHL. Perennial shares have inched up 1.1% over the past year, closing at 85.5 cents on Feb 28. That values them at 14.2 times historical earnings.
Perennial is engaged in building large-scale mixed-use developments in China, Singapore, Malaysia and Ghana. Its key projects include commercial hubs in Chengdu, Sichuan; and Xi’an, Shaanxi. It also has a healthcare business involving medical services, senior housing and maternal and child health, mostly in China.
The largest shareholder of Perennial is its chairman, Kuok Khoon Hong, who owns a 35.6% stake. Kuok is chairman and CEO of agribusiness company Wilmar International, which has a 20% stake in Perennial. Pua is also chief operating officer and an executive director at Wilmar; and a non-independent, non-executive director at property and engineering player United Engineers (UE). Pua was previously executive director and CEO of Perennial China Retail Trust Management, trustee-manager of Perennial China Retail Trust.
For FY2017 ended Dec 31, Perennial’s earnings leapt 186% to $100.3 million. This was mainly owing to divestment gains from the sale of a 20.2% stake in a property called Triple-One Somerset and net fair value gains of $52.2 million. Revenue dropped 32.4% to $74.5 million, owing to the absence of revenue from Triple-One and lower project management fees.
The company has been making progress with its China healthcare business. CGS-CIMB Research analyst Lock Mun Yee expects Perennial’s healthcare arm to be boosted by its hospitals and eldercare business in China. “Within its nascent healthcare arm, Perennial will focus on hospitals/medical centres as well as eldercare/senior housing segments as part of its vision to be an international medical services provider in China. Its eldercare unit had 3,577 operating beds at end-FY2017 and aims to add 3,132 beds in FY2018. Meanwhile, it has established a US$1.2 billion ($1.6 billion) joint venture to invest in healthcare integrated mixed-use developments connected to high-speed railways in China’s Tier 1 or strong Tier 2 cities,” she notes in a Feb 8 report. Lock has an “add” call on Perennial, with a price target of $1.12.
DBS Group Research is similarly bullish on Perennial’s recent moves in China. Analysts Rachel Tan and Derek Tan highlight that Perennial has achieved 85% committed occupancy in its Chengdu Medical Hub, set up a healthcare fund to be deployed within three years and received approval to develop land in Xi’an for medical usage. “Perennial’s hidden gems lie in its vast integrated projects in strategic locations across the main transportation hubs in China, though these have lengthy gestation periods. Apart from property, it has built a portfolio of medical and healthcare services to leverage on rising healthcare demand in China and Singapore,” they write in a Feb 9 report. DBS has a “buy” call on the stock, with a price target of $1.05.
However, Perennial is also entangled in what seems like a tussle for control of UE. Yanlord Perennial Investment, a consortium 45% owned by Perennial, Kuok and Wilmar, and 49% owned by Yanlord Land Group, last year bought a 33.5% stake in UE from Oversea-Chinese Banking Corp, Great Eastern Holdings and OCBC’s founding Lee family. YPI subsequently made an offer for the rest of UE, but the offer lapsed after property developer Oxley Holdings bought a stake in UE and pushed the counter above YPI’s offer price.
In December, UE’s new board — which is controlled by YPI — proposed that UE should make a cash offer for the remaining shares of investment holding company WBL Corp that it does not already own. UE’s board had intended for WBL to become a wholly-owned subsidiary of UE, to “generate further cost and operating synergies”.
But minority shareholders scuppered the purchase at an extraordinary general meeting on Feb 23. Oxley, which owns 15% of UE, was among the parties who voted against the WBL deal. Shareholders representing 67.4% of UE voted against the deal.
