PLife – CIMB

Good results

• In line; maintain Outperform. 9M10 DPU of 6.41cts met consensus and our expectations (77% of our FY10 estimate). This was a 12.6% yoy improvement, led by full contributions from acquired Japanese assets. In the quarter, improvements to forward earnings were achieved through advance refinancing of debt on lower interest costs and accretive asset enhancement. While the impact of AEI is not immediately material, we view the work positively as management should be able to milk organic growth consistently (lacking in the Japanese portfolio) through such work. We factor in slightly higher Japanese contributions going forward, resulting in 1-3% upgrades in our DPU estimates for FY10-12. We also roll over our DDMbased target price to end-CY11, raising it to S$1.96 from S$1.91 (discount rate 7.2%). PLife REIT trades at 1.2x P/BV and a prospective FY11 yield of 5.9%.

• 3Q10 DPU 2.25cts grew 17.6% yoy, primarily from higher revenue from full contributions from Japanese assets acquired in June-July; and a higher CPI-pegged minimum rent for Singapore assets by 1.73%. Contributions from new Japanese assets were slightly better than expected, at 77% of our FY10 forecast.

• Debt structure improved, with the early refinancing of S$215m Japanese debt (46% of its total) which would have been due in 2H11. The debt was broken into 4- and 5-year committed term loans resulting in substantially longer weighted average debt maturity of 4.2 years (from 2.87 years) and no refinancing requirements till 2013. Weighted average cost of debt was lowered to 2.13%, (down about 30bp) with interest cost savings of about S$1m. Asset leverage was 35% as at 30 Sep 10. This gives the REIT debt headroom of S$240m, assuming 45% asset leverage. We believe potential acquisitions within S$200m are more likely to be fully debt-funded.