Perennial China Retail Trust

Perennial China Retail Trust: PCRT reported a 1Q12 profit of $1.8m, 52% below their own forecast of $3.7m. (Management forecasts were as at IPO.) Actual distributable income however, was only $74,000, way below their own forecast of $5.2m as the headline profit included $2.6m of forex gains.The main underperformance came from the lower-than-expected contributions from its Shenyang properties at $0.9m vs its forecast of $6.2m. The shortfall in distributable income from property rental is being mitigated by the various earn-out deeds agreed with the properties' vendor Shanghai Summit. Therefore, the amount available for distribution in 1Q12 remains at $10.6m, in line with management's forecast. Full-year forecast DPU of 3.81c/share has been locked-in by the amount of earn-outs available for drawdown, translating into a yield of 7.3% at current share price. In fact, based on the total earn-outs available, the DPU has been locked-in all the way till FY14. Kim Eng expect mgt to be actively looking to improve the yields of the operating properties in the meantime.