PLife – CIMB
Staying defensive
• In line. 4Q08 DPU of 1.84cts and FY08 DPU of 6.83cts were in line with Street and our expectations. Full-year gross revenue of S$53.9m was up 218.9% yoy (only four months of contribution in 2007 because of listing in August). Qoq growth was strong in 4Q08 at 21.2% on full contributions from portfolio assets and higher minimum rents from Singapore hospitals. This minimum had been fixed at 6.25% based on the CPI + 1%, effective from 23 Aug 08 to 22 Aug 09. Foreign-exchange loss from an appreciating yen (related to its Japanese assets) in 4Q08 was significant at almost S$8m, although this did not affect distribution. As at 31 Dec 08, portfolio value was S$1.048bn, down S$3.3m because of acquisition costs. Asset leverage remained low at 23.3%.
• New CEO and CFO appointed; capital management remains prudent. Acting CEO and CFO Mr Yong Yean Chau has been confirmed as the new CEO. Vice President of Corporate Finance, Mr Loo Hock Leong, will take over as CFO. Both appointments take immediate effect. With the ex-CFO at the helm, we expect PLife to take a more conservative stance. PLife’s current capital management is positive: 1) 100% of its debt is now long-term debt with a weighted average tenure of 2.8 years; 2) PLife has no refinancing risks until 2011; 3) interest cost has been fixed at 2.85% for 100% of its debt for three years; and 4) foreign-sourced income has been hedged for five years. Acquisitions in 2009, if any, are likely to be opportunistic and funded by debt. PLife has S$210m of unutilised revolving credit facilities and a S$500m medium-term note programme established last August.
• Maintain Outperform with lower target price of S$1.20 (from S$1.30). The outlook for organic growth is positive as the CPI-pegged base-case rents are set to grow by 6.25% in the first eight months of FY09. We refine our revenue projections based on actual FY08 income and lower our CPI assumption (for Sep 09 onwards) to 0% from 2%. Our DPU estimates for FY09-10 decrease by 6-8%. We also introduce FY11 forecasts. Our target price has been lowered to S$1.20 (from S$1.30). At 0.56x P/BV, PLife is cheaper and has less rental downside and refinancing risks than the other “premium” REITs, A-REIT (0.78x) and CMT (0.64x).