PLife – Phillip

Parkway Life (Plife) REIT reported gross revenue for 2QFY09 of $16.1 million (+28.9% y-o-y, -1.5% q-o-q)), net property income was $15.0 million(+27.9% y-oy, -1.3% q-o-q). Distributable income was $11.4 million(+13.7% y-o-y, flat q-o-q). DPU for the quarter was 1.89 cents (+13.8% y-o-y, flat q-o-q).

The growth in revenue comes mainly from the contribution of Japanese properties that were acquired in 3Q08 and also the annual revision of rental from the Singapore hospitals that took effect from August 2008. It can be seen that from 4Q08 onwards, revenue and DPU were fairly stable. The REIT manager further announced that the Singapore hospitals rental is set to increase by 4.36% beginning 23 August 2009. Revenue is also expected to get a boost from the increase in rental of the P-Life Matsudo property following completion of an asset enhancement initiative (AEI) to maximize plot ratio.

Plife REIT has no short term refinancing concern with a gearing of 22.7%. Total debt is $242 million with $34 million coming due in 2nd half 2010 and the rest in 2011. Plife has in place a $500 million multicurrency MTM programme as well as a newly secured $50 million Islamic revolving credit facility.

Being exposed to the relatively stable healthcare sector, Plife REIT has shown resiliency in the recession. The inflation linked revenue model ensures revenue is downside protected. We revised up our revenue forecast to factor in the growth from the annual revision of the Singapore hospitals and from the Matsudo property. Our FY09F DPU remains unchanged at 7.59 cents while FY10F DPU rises from 7.56 cents to 7.71 cents. Fair value revised upward from $1.19 to $1.21.