PLife – CIMB

There’s money in the bag

• Performance on track. 3Q08 results were in line with Street and our expectations. DPU of 1.71cts forms 26% of our forecast of 6.57cts for FY08. Gross revenue of S$13.3m was up 6.9% qoq on contributions from Japanese assets acquired earlier in the year. YTD DPU of 5.0cts forms 76.1% of our full-year estimate, in line.

• Borrowings refinanced on 3-year terms, cost of debt fixed. In October, management secured S$200.6m from two 3-year loan facilities that would fully refinance 99% of its total debt of S$202m previously drawn on short-term facilities. The all-in cost of debt of 2.85% is hedged for three years. Over and above current borrowings, management has in place more than S$100m of long-term facilities and S$250m of short-term facilities that could provide ammunition for potential acquisitions, when opportunities arise. Separately, net cash contributions from the Japanese assets are hedged for five years, mitigating risks of forex fluctuations.

• Changes in assumptions. As 99% of the total debt has been fixed for three years, we see limited risk for interest costs and lower our cost of debt assumption to 3.2% (from 4%) for FY09 onwards. YTD, PLife has fulfilled 70% of our acquisition forecast of S$250m for FY08. Although the company has in place funds to fulfil our acquisition target for the year, we take a conservative view and remove our acquisition assumptions for FY08-09.

• Maintain Outperform; lowered target price to S$1.30 from S$1.46. Our DPU estimates for FY08-9 increase by 9-12% on lower interest-rate assumptions, while FY10 estimate declines by 12% on the removal of acquisition assumptions. Our DDM-derived target price (discount rate 8.1%) drops to S$1.30 from S$1.46. It is laudable that management had been able to secure long-term facilities at a low cost of debt particularly on an unsecured basis. We continue to like PLife for its attractive forward yields of more than 10% with limited downside risk to earnings. Maintain Outperform.