PLife – Phillip

Poised to build on its past successes

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.

• 4Q12 (FY12) revenue S$24.0mn (S$94.1mn), NPI S$22.1mn (S$86.4mn), distributable income S$16.3mn (S$62.4mn)
  
• DPU for 4Q12 (FY12) at 2.69 cents (10.31 cents)
  
• Maintain Accumulate with revised target price of $2.450
  

What is the news?

PLife REIT turned in a strong set of results for 2012. DPU grew 7.4% from 9.60 cents in FY11 to 10.31 cents in FY12. The increase was largely due to the purchase of three Japan properties, higher rent collected from Singapore properties and cost-savings on financing. The portfolio asset was revalued at S$1.4bn and recognized revaluation gains of 3.1% compared to last year.

How do we view this?

FY12 DPU exceeded our estimates by 3.8%, principally due to lower-than-expected finance and trust expenses. It is encouraging to see FY12 DPU continued to grow at 7.4% after five years of portfolio expansion since the IPO in 2007. Marching towards 2013, the trust is poised to repeat and build on its past successes on account of (i) potential rental increase for Japan properties under the “Refurbishment AEI” concept (ii) CPI+1% rental revision for Singapore properties owing to elevated inflation rate in Singapore, and (iii) enlarged debt headroom of S$173.5mn to drive inorganic growth.

Investment Actions?

We fine-tuned our assumptions and rolled over our estimates to FY13 and included FY17 to our model. With the adjustments, our price target is raised from S$2.33 to S$2.45, indicating a total return of 11.1% for FY13. As our model does not take into account of potential acquisitions and asset enhancement, further DPU upsides could be expected. Given our conservative projections, we maintain our Accumulate call in view of potential DPU growth.