Perennial China Retail Trust

[Musicwhiz]

Jun 10, 2011
Perennial ends 13% off on SGX debut
Stock loses $101m in a day; traders disappointed but firm's mood upbeat
By Gabriel Chen, Finance Correspondent

PERENNIAL China Retail Trust, which owns shopping mall assets in China, closed at 61 cents on its debut in the Singapore Exchange yesterday - 12.86 per cent below its initial public offering (IPO) price.

In just a day, the stock lost $101 million in value.

The poor performance of the trust, which is managed by a company controlled by former CapitaLand retail chief Pua Seck Guan, was disappointing to investors, given that it had already deferred its IPO launch in March due to volatile market conditions.

But at the listing ceremony yesterday, Mr Pua was anything but perturbed by the less-than-ideal debut.

'I think the market is volatile. It's just like a wave. When the wave comes, it may be down, or if it's high tide it may go up,' he said.

'I guess what's important is that as management, we are like... the captain of the ship, and we need to sail through the storm and the waves.

'And we believe that we have a good product... and it's our job to deliver what we have told investors, and to deliver the returns that we have projected to investors,' he concluded.

Strong words of confidence, industry watchers say, but the assurance is much-needed because the market for new listings has been extremely rocky of late.

Take the performance of the last four IPOs in Singapore prior to Perennial's listing.

Hutchison Port Holdings Trust, Mapletree Commercial Trust and Chew's Group have all dipped below their offer prices.

Dyna-Mac Holdings, which counts blue-chip rigmaker Keppel Corp as a shareholder, is the only one that has bucked the trend. The provider of engineering, procurement and construction services to the offshore oil and gas industries has seen its share price rise 54.29 per cent since its listing on Mar 2.

The lacklustre appetite for risk has also hit the world's biggest IPO hub Hong Kong, with shares in Swiss commodities giant Glencore still below water and luggage maker Samsonite said to be cutting its IPO price range.

Even 'hot stocks' have not been spared. Social media group LinkedIn, which saw a huge run-up in its share price from US$45 to over US$100 on the first day of trading, has been hit by the poorer sentiment, and is now trading at US$75.

It all has to do with renewed worries over the global economic outlook and the uncertainty surrounding the resolution of Greece's debt crisis, experts said.

Federal Reserve chairman Ben Bernanke on Tuesday also acknowledged that the United States' economy had slowed, but offered no hint that the central bank was considering further stimulus to support growth.

AmFraser Securities strategist Najeeb Jarhom predicted: 'The market's waiting to fall, and it looks quite bearish for the next couple of weeks.'

gabrielc@sph.com.sg

[Jared Seah]

It seems investors are now more discerning. Which is good.

We can see beyond the smoke and mirrors:

http://singaporemanofleisure.blogspot.co...stics.html

[tonylim]

This one down from 0.70 IPO price. Malls will only be operational in 2014 , seems another con job .

[Nick]

I was wondering what are the implications of owning properties with leasehold land ? PRCT (and most PRC assets) are armed with leases so do we assume that the asset value hits zero eventually ? Will borrowers allow the loans to be refinanced if the lease-span reaches a very short period ? How will this impact property valuation (since REITs/Trusts properties are pegged to fair valuation) when the outstanding lease is much shorter ? In other words, should such REITs/Trust retain income to top up the lease premium and repay existing loans ?

Would appreciation forummer views in this matter.

Shenyang Red Star Macalline Furniture Mall (Operational)
Purchase Price: RMB 1.28 billion
Expiry of Land Use Rights: Jan 2059 (Commercial component expires in Jan 2049)

Shenyang Longemont Shopping Mall (3Q 2011)
Purchase Price: RMB 1.52 billion
Expiry of Land Use Rights: Jan 2059 (Commercial component expires in Jan 2049)

Shenyang Longemont Offices (2Q 2012)
Purchase Price: RMB 0.92 billion
Expiry of Land Use Rights: Jan 2059 (Commercial component expires in Jan 2049)

Foshan Yicui Shijia Shopping Mall (3Q 2013)
Purchase Price: RMB 0.8 billion
Expiry of Land Use Rights: May 2049

Chengdu Qingyang Guanghua Shopping Mall (2Q 2014)
Purchase Price: RMB 0.8 billion
Expiry of Land Use Rights: Jan 2050

Prospectus pg 69:

There is uncertainty on the quantum of land grant premium which PCRT will have to pay and
additional conditions which may be imposed if the Trustee-Manager decides to seek an
extension of the land use rights for the Properties.

The land upon which the Properties are situated are granted by the PRC government by way of land
use rights. The term of the land use rights for retail use purposes is 40 years and for mixed-use
purposes is 50 years. Upon the expiration of the terms of the land use rights, the land use rights will
revert to the PRC government unless the land user applies for an extension of the term of such land
use rights no later than one year prior to the expiration of the terms. If an application for extension is
granted (such grant shall be given by the PRC government unless the land in issue shall be taken back
for the purpose of public interests), the land user may be required to, among other things, pay a land
grant premium. If no application is made, or such application is not granted, the Properties upon the
land shall be disposed of in accordance with the land use right grant contracts. As none of the land use
rights granted by the PRC government similar to those granted for the Properties has, as at the Listing
Date, run its full term, there is no precedent to provide an indication of the quantum of land grant
premium which the Property Companies will have to pay and the additional conditions which may be
imposed if the Trustee-Manager decides to seek an extension of the term of such land use rights for
the Properties upon the expiry thereof.

[tonylim]

I atteded Metro AGM recently, this question was raised and the Director incharge of Metro's China property said no one knew the outcome because China opened their door in 1980 , so no one experienced it yet ,.
But he said few years before the lease expiry , they will start negotiting with the authority, he said worst come to worst they take back the land and building , but we have collected enough rents by then. So this is a risk that investors have to look into it.

[freedom]

I believe that it has no much difference with the industrial land lease companies are getting from JTC in Singapore. You just gotta have faith that the government is not going to rip you off.

[Nick]

Insiders buying heavily over the past month including Wilmar's boss. Trading at 40.0 cents which is a steep discount from its IPO price of 70.0 cents. It has taken a heavier beating than its larger rival - Treasury China Trust or CRCT. But I noticed that their projected DPU contains 'earn-out deed' - what does this mean ?

[freedom]

Insiders buying heavily over the past month including Wilmar's boss. Trading at 40.0 cents which is a steep discount from its IPO price of 70.0 cents. It has taken a heavier beating than its larger rival - Treasury China Trust or CRCT. But I noticed that their projected DPU contains 'earn-out deed' - what does this mean ?

if no 'earn-out deed', it is difficult to pay any meaningful dividend. with 'earn-out deed', they can sell their assets at a higher price than using yield on asset alone.

[Nick]

Where does the cash for the earn-out deed come from ? I don't quite understand how it works. Was surprised to see it taking a big portion of their projected distributable income.

[freedom]

Where does the cash for the earn-out deed come from ? I don't quite understand how it works. Was surprised to see it taking a big portion of their projected distributable income.

from the sponsors if I am not wrong. something like reits' rental support