PLife – UOBKH
FY07: Maiden results exceeded forecast
Parkway Life REIT reported its maiden set of results for the period from 23 Aug to 31 Dec 08.
Parkway Life REIT achieved rental revenue of S$16.9m, 5% higher than forecast provided in the IPO prospectus. This comprises base rent of S$10.7m and variable rent of S$6.2m. Higher variable rent was driven by increased revenue from foreign patients, higher consumption of diagnostic outpatient services and contribution from Parkway Cancer Centre.
Distributable income was 5.8% higher than forecast at S$13.6m. Parkway Life REIT declared DPU of 2.27 cents, representing annualised distribution yield of 5.3%. The distribution will be paid on 28 Mar 08.
Revaluation boosted NAV/share. Parkway Life REIT has revalued its portfolio from S$775.3m at 17 Jul 07 to S$831.6m at S$831.6m at 31 Dec 07. This is an increase of S$56.3m or 7.3%. The appraised value for hospitals are based on discounted cash flow while the appraised value for medical centre units at Mount Elizabeth Medical Centre (S$5.7m per medical centre unit) and Gleneagles Medical Centre (S$2.5m per medical centre unit) are based caveats lodged. NAV/share for Parkway Life REIT has therefore increase by 8.8% to S$1.36.
Investment grade rating from Fitch boost debt capacity. Parkway Life REIT will pursue yield accretive acquisitions focusing on Singapore, Malaysia, Thailand, India and China. The company has received investment grade rating of BBB+ from Fitch Rating on 19 Feb 08. Its maximum permissible gearing has increased from 35% to 60%. Additional debt capacity to fund acquisition has increased from S$410m to S$1,200m.
Parkway Life REIT will diversify in terms of asset type. It will seek investments in ambulatory surgery centres, primary clinics, medical office building, step-down care facilities such as nursing homes, research & development (R&D) facilities and pharmaceutical storage and distribution facilities. Parkway Life REIT targets to targets to double size of portfolio to S$1.6b by end-09.
Reiterate BUY. Parkway Life REIT provides strong defensive qualities. It benefits from revenue growth at Mount Elizabeth Hospital, Gleneagles Hospital and East Shore Hospital as variable rent is 3.8% of adjusted hospital revenue. Our target price is S$1.72 based on the discounted dividend model (discount rate: 7.1%, terminal growth: 3%).