Perennial China Retail Trust

[Nick]

The official prospectus is out and available for download here -

http://info.sgx.com/webipo.nsf/6bb750ded...100018879/$FILE/PCRT%20Final%20Prospectus.pdf

1) I noticed that the Trust will be listed as a debt-free entity which implies significant headroom for M&A and financing for its development projects.

2) Projected annualized distribution yield of 5.3% and 5.5% for FY 2011 and 2012 respectively.

3) The distributable income from these 2 years are being partially funded by an 'Earn-out Deed'. View pg 108 for more info.

4) There are 3 development projects which will be fully operational by 2014. These will boost revenue significantly.

5) The Trust will be listed with $691 million worth of properties and development assets, $68 million cash and $11 million worth of liabilities in total.

A good peer to compare with would be its larger rival Treasury China Trust which trades at a similar yield though with a much larger discount to NAV.

(Not Vested in any Property Development Trust)

Disclaimer: This is not a call to to subscribe or a call to avoid the IPO. My reflections are my own point of views and may be wrong. Please correct any errors made in the above post.

[freedom]

it looks to me, just like sale-leaseback in reit, pushing up rents to get a good sale....

[Musicwhiz]

Business Times - 08 Jun 2011

Perennial China 1.6 times subscribed

By NISHA RAMCHANDANI

PERENNIAL China Retail Trust (PCRT) has raised $776.2 million from its initial public offering. At the close of its IPO, its institutional placement and public offer tranches were 1.6 times subscribed.

PCRT had initially planned to list earlier at about $1 a unit to raise some $1.1 billion but plans were put on hold in March, reportedly due to volatile market conditions. When plans were revived, its units were priced at $0.70.

PCRT had earlier secured eight cornerstone investors who subscribed for 516.65 million units. With additional units subscribed by cornerstone investor Shanghai Summit and the subscription by sponsor Perennial Real Estate under the placement tranche, these parties hold about 60.8 per cent of PCRT on the IPO's completion.

The total offering of $776.2 million for subscription at $0.70 per unit comprised 545.221 million units (49.2 per cent of the offering) from the cornerstone investors and sponsor, while 511.451 million units representing 46.1 per cent had been placed out to international investors; and 52.128 million units (4.7 per cent) placed out to the public in Singapore.

Perennial China Retail Trust Management CEO Pua Seck Guan said: 'We are very pleased with the warm reception that investors have given us, despite tough market conditions and a subdued appetite for new listings. We are especially encouraged by the strong support from real estate specialists, long-only funds and private wealth funds who account for over 80 per cent of the offering.'

He also went on to add that PCRT is well positioned to benefit from retail growth opportunities in China, which would allow it to provide unitholders an 'attractive total return of strong net asset value growth and stable distributions'.

The balloting outcome for the public offer will be released today while the PCRT units will commence trading at 2pm tomorrow.

[Nick]

IPO Balloting Result:

http://info.sgx.com/webcoranncatth.nsf/V...90046DF51/$file/Perennial_China_Retail_Trust_Balloting_Announcement_08.06.11.pdf?openelement

Looks like most individual retail investors will get everything they applied for.

(Not Vested)

[freedom]

open how much lower?

retail tranche, almost 100%

one question will be, if CapitaMalls Asia took 5 years to mature the malls in China, can the new Trust maintain distribution using its NPI? or just pure acquisition and earn-out agreement?

[Nick]

open how much lower?

retail tranche, almost 100%

one question will be, if CapitaMalls Asia took 5 years to mature the malls in China, can the new Trust maintain distribution using its NPI? or just pure acquisition and earn-out agreement?

Let's not forget that the distribution payout will drop to at least 50.0% in FY13 onwards. I don't understand the purpose behind this business model - a developer that chooses to distribute its cash-flow and tap on equity to develop new assets ? Sounds very inefficient. Judging by TCT unit price's steep discount to its NAV, will PRCT suffer a similar fate ? Though Ascendas India Trust seems to have mastered this...very intriguing business model.

[freedom]

I see PERENNIAL China Retail Trust as some sort of sale-leaseback deal for Shanghai Summit to get out its certain commercial portfolios.

[KopiKat]

I see PERENNIAL China Retail Trust as some sort of sale-leaseback deal for Shanghai Summit to get out its certain commercial portfolios.

What's interesting to me is that Shanghai Summit is both a cornerstone and placement investor. From IPO prospectus (Pg85),

(3) Includes the number of Units that Shanghai Summit Pte. Ltd. is subscribing for under the relevant Cornerstone Subscription
Agreement, but excludes the 124,285,000 Units (amounting to 11.1% of the total number of issued Units immediately upon
completion of the Offering) that Shanghai Summit will be subscribing for under the Placement Tranche. The total number
of Units that Shanghai Summit Pte. Ltd. will own pursuant to its subscriptions under its Cornerstone Subscription Agreement
and the Placement Tranche will be 167,142,000 Units and will amount to 14.9% of the total number of issued Units
immediately upon completion of the Offering.

It'd appear to me that they really want to cash out and just hold a non-substantial stake of 3.8% (cornerstone stake) but it's also to their interest to see that this IPO does not fail. Thus, another 11.1% in the placement tranche, in case the IPO is under-subscribed and fails(??).

[Nick]

PRCT is currently trading at 65.0 cents (5.0 cents discount to its IPO price of 70.0 cents).

(Not Vested)

[Nick]

PRCT closed at 61.0 cents with 91.3 million shares traded. This is a 9 cents discount to its IPO price of 70.0 cents which represents a 12.9% loss. Considering the sharp discount TCT trades to its NAV, I won't be surprised if the market rates PRCT in the same way.

(Not Vested)

Disclaimer: Not a buy/sell call. Do your own research.