Perennial China Retail Trust : Maiden contribution from Jihua (CIMB)

Perennial China Retail Trust
Current S$0.54
Target S$0.57
Maiden contribution from Jihua

▊ With the opening of Jihua Mall came its maiden revenue contribution of S$1.3m and pre-operating expense of S$2.7m. While pre-operating expenses may drag down earnings in FY13-14, the effect on distributions should be mitigated by the earn-out funds. 3Q/9M13 DPU accounted for 24%/71% of our FY13 forecast, in line with our and consensus expectations. Our target price, still based on 20% discount to RNAV, is unchanged at S$0.57 as we roll over estimates to FY14. We maintain a Neutral rating.

 
Maiden revenue contribution from Jihua Mall, Foshan
The Jihua Mall officially started operations in Aug 2013 and contributed revenue of S$1.3m in 3Q2013. While committed lease for the mall currently stands at 95%, only c.70% of the mall are currently operational and some tenants are in their rent-free fit-out period. We expect operational and rent-paying leases to reach the committed level and stabilise by 2-3Q2014.  
 
Pre-operational cost weighs
S$2.7m out of S$3.1m property operating expenses was incurred for Jihua, mainly for marketing and pre-operational costs. Increased marketing expenses will be beneficial if it translates into higher shopper traffic and tenant sales growth, and consequently rental income. However, we believe that the unoccupied residential/office units in the vicinity remains a concern for Jihua and Qingyang. Given our expectation of longer gestation period for these two malls, we expect pre-operational costs to drag down earnings in FY13-14.  
 
Dividend buffer buys time
3Q2013 shopper traffic for Shenyang Longemont increase 183% yoy on the back of shift in tenant mix and aggressive marketing campaigns. We believe the management will be able to fulfil their aim of growing tenant sales, and consequently rental revenue, in time to come. The earn-out fund, which lasts till end 2014, provides the much-needed time for its assets to stabilise. Upon its expiration, the management has not rule out the possibility of monetising completed assets to unlock value


Source/Extract/Excerpts/来源/转贴/摘录: CIMB-Research,
Publish date: 06/11/13