■ Enters into anchor lease agreement with IHH for the Perennial International Health and Medical Hub in Chengdu East.
■ Ramping up pre-commitments, potential draw for other complementary health and wellness-related services.
■ Maintain Add with unchanged target price of S$1.39.
Secures notable healthcare anchor tenant
● PREH has entered into an anchor lease agreement with IHH Healthcare Bhd (IHH) and its China JV partner to lease 48,000 sq m of net leaseable area at the Perennial International Health and Medical Hub in Chengdu. The IHH JV plans to operate a 350- bed hospital, its first tertiary facility in Western China. The deal is subject to the IHH JV obtaining the necessary government and regulatory approvals to operate the hospital.
First IHH tertiary hospital in Western China
● When operational in 2H17, the ParkwayHealth Chengdu Hospital will offer specialised care and services such as obstetrics and gynaecology (O&G), paediatrics, cardiology, orthopedics, ophthalmology and internal medicine. According to IHH management, this hospital will complement its presence in China, allow it to move up the value chain in a key growth market and enable it to tap into the rapidly-rising demand for quality healthcare in the Western China region.
A potential draw for other complementary services
● We are positive on this transaction. Apart from securing an anchor lease with a notable healthcare operator, the presence of a high-quality player could attract other complementary healthcare and wellness-related services. The Perennial International Health and Medical Hub is part of the prime Chengdu East High Speed Rail integrated development, with a total GFA of 280,000 sq m, and scheduled to be completed in 2Q16.
Ramping up pre-commitments, on track for completion in 2016
● With this lease, PREH pre-commits c.53% of the 90,000 sq m GFA that it had earlier earmarked for healthcare use. The remaining space is intended for medical suites, complementary healthcare and wellness-related services such as traditional Chinese medicine (TCM), maternity care centres, rehabilitative centres and medical aesthetics services.
● This transaction is expected to achieve an attractive yield on cost and the property is likely to provide a strong recurring income stream when completed and operational. We remain positive on PREH and maintain our Add rating, with an unchanged RNAVbased target price of S$1.39. Other re-rating catalysts include potential sale of strata office units at its two properties in Singapore and the launch for sale of some of its China development projects. (Read Report)
Source : CIMB Research