Perennial Real Estate's 9M profits plunged 44% to $9.5m

But here's one reason to stay upbeat about its future growth.

Perennial Real Estate Holdings (PREH)’s 9M16 net profit fell 44% to S$9.5m. The lower net profit was mainly due to marginally lower revenue (-0.7%) coupled with higher cost of sales (+19%), higher operating expenses (+15%), higher interest expenses (+10%) and the absence of acquisition fee (AXA Tower) recognised in 2Q15, offset by more than doubled the share of income from associates and JVs to S$19m.

The higher share of earnings from associates and JVs were mainly due to fair value gain of S$7.5m from the reclassification of Chengdu Plot D2 to investment property. Excluding the fair value gain, PREH recorded a net profit of only S$2m in 9M16.

Moving forward however, DBS Vickers Securities remain optimistic on its medium to long term development plans especially now that it is slowly coming to fruition in China.

"Apart from real estate, it offers partial exposure to the growing healthcare sector in China," it said.

According to the research house, key catalysts include i) better-than-expected strata sales, ii) the successful opening and execution of Perennial International Health and Medical Hub in Chengdu, and iii) potential improvement in sentiment on the property market in China when project developments are near launch or completions.