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"E-book" by AK

Second "e-book".

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PREH is likely to continue trading at a big discount.

Saturday, September 3, 2016

My experience with Perennial Real Estate Holdings (PREH) started from its days as Perennial China Retail Trust (PCRT).

PREH has a portfolio consisting mostly properties in China in terms of asset value (75%) and the balance being properties in Singapore.


Some numbers:

NAV/share= $1.68
Gearing= 0.45x
EPS=6.88c

At 90c a share, we are looking at a PE ratio of about 13x.

I believe that PREH is a long term value creator. 

The investment thesis is somewhat similar to that for CapitaMalls Asia which I had an investment in before. Similarly, PREH's Chinese investments will take time to deliver the goods. 

PREH is definitely not for the impatient investor. 

Although not comparable in many ways, for something similar in terms of gearing and EPS, the purist income investor might be more interested in Croesus Retail Trust (which holds Japanese commercial properties) and regular readers know that I have a significant investment in Croesus Retail Trust.





At the moment, I have a smallish exposure to PREH and I am likely to add to my position if its stock price should decline further.

I like PREH's longer term growth story and I am quite willing to wait for it to do better.

I bought into my investments in both OUE and Wing Tai Holdings at a 50% discount to NAV or more. So, I will probably add to my investment in PREH using the same yardstick.


Related posts:
1. Perennial Real Estate Holdings.

2. Perennial China Retail Trust.
3. Croesus Retail Trust.
4. CapitaMalls Asia.

18 comments:

Tan Wee Boon said...

Hi AK,

Thanks for sharing your thoughts :)

Kevin said...

Hi AK,

Happy September to you.

Glad to read about your posting on Perennial and Croesus. Owning both stock and also also the Perennial retail bonds(both 4.55% and 4.65%). :)

AK71 said...

Hi TWB and K,

Good luck to all of us. ;)

Siew Mun said...

Bought a smallish 4.55% bonds at 0.985 at a discount from par value of 1.00 :-)

Jasmine Tay said...

Hi AK

I am a one month old newbie into investing. Have been reading up your blog.

Just wondering, will you still buy this bond now if you haven't bought any?

My banker told me about bond refinancing. Don't seems to find any post from you on this. What's your opinion?

AK71 said...

Hi Siew Mun,

A nibble is OK. ;)

AK71 said...

Hi Jasmine,

Nibble like what Siew Mun did? As long as it fits your motivations, why not?

Bond refinancing? I won't borrow money to invest in junk bonds.

Solace said...

"PERENNIAL Real Estate Holdings (PREH) said on Tuesday its healthcare arm is taking up a 49.9 per cent stake in Renshoutang, the largest private eldercare operator in Shanghai, through a capital injection of 735.5 million yuan (S$148 million)."

From past 4 quarters, it confirm that PREH will not be a pure property developer. It has been aggressively integrating health care business into its portfolio.

Pua Seck Guan has mentioned before that, several of the healthcare business that PREH owns or through JV will be tenants in their upcoming development properties in china. in a way, it forms synergy between the 2 business. it signals well for the long run. Future looks bright in the future

On the other way, due to all the development properties and the aggressive buying of health care business, it will remained heavily in debt. I do not expect gearing to decrease any time soon. Another potential risk is whether the development properties would turn out be fully leased with a good footfall traffic is another thing to consider. If AK can remember, when ShenYang Mall was completed, it has low occupancy rate.

I have a small long position in PREH, with confidence that the corporate heavyweights of Pua Seck Guan, Ron Sim and Kuok Khoon Hong would know how to execute the operations to make it a success.

AK71 said...

Hi Solace,

Definitely not for the faint hearted.

This needs lots of patience and a strong stomach. ;)

AK71 said...

"With net gearing of about 0.59x, the stock is trading at less than 0.6x P/B,
partly to account for operational risks in China." Lim & Tan

blazingruby60 said...

hello AK
perennial holdings has dropped to a 52 week low of 0.745 at point of writing. would you perhaps increase your holdings of this share. cheers

AK71 said...

Hi Ruby,

When I buy stocks like this, same with OUE and Wing Tai, I am never in a hurry to add because value could take a long time to unlock. I would only add if there should be a more meaningful decline in price.

K said...

Hi,

It is interesting to note that 80% of this company is owned by Kuok, Sim, Wilmar and Pua. So, I believe the share price depends very much on them... :)

AK71 said...

Hi K,

Well, they keep buying. ;)

K said...

Hi AK,

You slowly becoming a significant shareholder too? :P

AK71 said...

Hi K,

Unlike Saizen REIT which was offering a very attractive distribution yield, PREH isn't. So, although undervalued, I am not as comfortable increasing my stake in PREH significantly. The same goes for OUE Limited. Just nibbling.

Solace said...

Should have come to your attention by now. PREH and Breadtalk will both book a gain.

Perennial leads sale of 70% stake in TripleOne

http://www.straitstimes.com/business/property/perennial-leads-sale-of-70-stake-in-tripleone

Will provide a much needed boost to its cash position, PREH being very aggressive in pursuing healthcare tieup and increasing stake in other projects, chinatown point, Aviva Tower possible in UK.

AK71 said...

Hi Solace,

Yup. I read that. I hope that there is more to come. ;)

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