PLife – Phillip

Slightly above our above expectation!

Company Overview

PLife REIT is one of the largest listed healthcare REITs in Asia by asset size. Its mandate is to invest in income producing real estate and/or healthcare-related assets primarily used for healthcare and/or healthcare-related

purposes in Singapore and Asia.

• 3Q12 revenue S$23.9mn, NPI S$22.1mn, distributable income S$15.6mn
  
• DPU for 3Q12 at 2.58 cents
  
• Raise FY12-16 DPU estimates by 0.9%
  
• Upgrade to Accumulate with revised target price of $2.330
  

What is the news?

PLife REIT reported another set of credible results for the third quarter. DPU was 2.58 cents, up 7.5% from a year ago. This was largely due to the acquisition of three Japan property assets, higher rent received from Singapore properties and cost-savings on financing.

How do we view this?

3Q12 DPU was slightly above our expectation. The DPU for the first three quarters formed 77% of our FY12 estimates. The shortfall in our estimates was partly because of higher trust expenses and lower payout ratio being assumed in our model.

Investment Actions?

We tweak our assumptions on the trust expenses and payout ratio to adjust accordingly to our earlier lower DPU estimates. On average, our DPU estimates are lifted up marginally by 0.9% over the period between FY12-16. In addition, we also lower our discount rate to 6.3% from 7.0%, to better reflect the present low risk-free rate. As a result, our price target is revised up to S$2.330. We believe PLife REIT’s defensive business model in terms of downside revenue protection and long weighted average lease term to expiry will be liked by investors who prefer sustainable and predictable distribution amid global economic uncertainties and slowdown. We upgrade to accumulate rating on the bases of potential upside in price and further yield compression.