PLife – DBS

4Q08 results in line

4Q DPU was 1.84 cents, bringing the year’s DPU to 6.83cents, which is within expectations. PREIT remains a defensive play as gross rentals are protected by the 1%+CPI formula. We revised TP down marginally to $1.11 on lower CPI growth assumption of 0% for 2009 versus 2.8% previously. Dividend yield of 9% is attractive with no immediate refinancing till c.2011.

4Q08 DPU 1.84 cents. FY08 gross revenue ended at S$53.9m due to higher rents from Singapore hospitals and contribution from its Japanese properties (S$5.2m). 4Q DPU was 1.84cents, bringing FY08’s total to 6.83cents. Fair value of properties dipped 0.3%, largely from writing down of capitalized acquisition costs from Japan properties. Valuation of Singapore properties remained stable at $832m on higher valuation of Gleneagles Hospital and Eastshore Hospital, offset by Mount Elizabeth Hospital.

No refinancing risks. PREIT average debt tenor is 2.8 years and they do not have refinancing risks in the next 24 months. Gearing stands at 23.3% with debt headroom of $300m before it reaches a gearing of 40%. Rental downside protected by “CPI formula”. Singapore hospitals revenue is protected by the minimum guaranteed rent, which will grow by at least 1%+CPI. In the event that CPI is negative, rental will still grow by at least 1%.

Maintain Buy, TP: S$1.11. We adjust our DPU and TP down slightly as we take into account lower CPI rate in 2009 and higher interest expense on a larger debt (than previously estimated). We have assumed 0% CPI rate in 2009, in line with DBS economists’ estimate. We like this counter for its prospective dividend yield of over 9%, with downside rental protection and limited refinancing risks till c.2011. Maintain Buy.