PLife – CIMB

Above the crowd

• Good exposure to healthcare assets. PLife is a healthcare real estate investment trust with six healthcare-related assets located in Singapore and Japan. It is the largest private hospital owner in Singapore with a 24% share of the private market. We expect demand for this asset class to grow strongly on the back of a greying Asian population, blooming medical tourism in the region and the Singapore government’s initiatives to establish a biomedical industry.

• Resilient income streams in inflationary environments. PLife’s income streams are protected by long lease periods of 15 years for all its assets, built-in rental adjustments linked to inflation rates, quality tenants and low property expenses.

• Lowest gearing among S-REITs, ready for acquisition growth. PLife has the lowest gearing among S-REITs, at 10% in 2Q08. With moderating borrowing costs and credit lines in place, it is equipped to grow through acquisitions in the near term.

• Initiate with Outperform and DDM-derived valuation of S$1.46. Using DDM valuation, we initiate coverage with a target price of S$1.46 (discount rate 8.1%, terminal growth 2%). This offers a total prospective return of 43.9% from potential price upside of 37.7% and a forward yield of 6.2%. PLife trades at a 22% discount to its NAV of S$1.36, representing a reasonable entry point in view of possible shortterm catalysts from acquisitions. PLife replaces A-REIT as our top pick in our SREIT universe.