PCRT – BT

Perennial jumps 7.1% after investments

SHARES of Perennial China Retail Trust shot up yesterday following substantial investments from the co-founders of Wilmar International.

Perennial's mainboard-listed stock closed at 53 cents yesterday, up by 7.1 per cent or 3.5 cents.

"I think the market is hungry for any kind of good news," one trader said.

The Singapore-headquartered business trust with a focus on retail real estate in China announced late on Wednesday that Wilmar chairman and chief executive Kuok Khoon Hong bought about $60 million worth of shares in an off-market transaction to raise his deemed stake in Perennial to 16.94 per cent from 5.02 per cent. The shares were bought at about 44.625 cents apiece on average.

Wilmar chief operating officer Martua Sitorus also raised his deemed stake to 5.66 per cent from 3.17 per cent previously.

Mr Kuok bought his shares from China businessman Tong Jinquan, whose wholly owned Shanghai Summit (Group) Co is a strategic partner of Perennial. Mr Tong, who previously held a 14.9 per cent stake, no longer owns Perennial shares.

But Mr Tong will continue to be a key business partner in China, Perennial Real Estate Pte Ltd executive chairman Pua Seck Guan said. Mr Tong's Shanghai Summit has also agreed to an additional "earn-out" amount of 342 million yuan (S$67.9 million) from July 2013 to end-2014. That money can be drawn down to ensure that Perennial can pay a minimum dividend of 19.4 yuan cents per unit during the relevant period.

"This new agreement could lift 'guaranteed' dividend yields to 8-8.5 per cent till FY14," CIMB analysts Donald Chua and Lee Syn Yi wrote in a note. "While management has not indicated any target distributions for FY13 and FY14, this ample buffer provides greater certainty of [dividend per unit] growth over the next three years and potentially more than 8 per cent dividend yields till 2014."

Mr Pua also entered into a deal with Mr Kuok and Mr Sitorus to establish Perennial Real Estate Holdings Pte Ltd, an investment vehicle with a target capital size of $500 million. The vehicle will eventually hold 49 per cent of Perennial Real Estate Pte Ltd, which controls 78 per cent of the trustee-manager of the listed entity.

Mr Pua told BT that Mr Tong's sale was a solution to onerous and hampering interested-party transaction rules that resulted from Mr Tong's role as a business partner in China.

Mr Tong's ability to act as a major sponsor, like in a rights issue, was also limited because of China's capital controls.

"He can't subscribe! And then people will think something is wrong," Mr Pua said.

Mr Kuok was a valuable shareholder with the depth of his pockets and his experience in China, Mr Pua added.

"He said, 'Seck Guan, you remind me of what I was 20 years ago trying to build my business'," Mr Pua recalled. "If we combine our strengths we could actually capitalise on a lot of opportunities in the marketplace today."