PLife – DBS

A stable set of results

At a Glance

• 3Q09 NPI of S$15.4m within expectations
• DPU of 1.91 Scents; ex-date on 11 Nov
• Acquisitions to aid growth could materialize in near term, in our view
• Retain Buy, TP S$1.37.

Comment on Results

3Q09 within expectations. 3Q09 net property income (NPI) grew by 23.2% to S$15.4m, driven by contribution from its Japan properties, which were acquired in Sep’08. Additionally, PREIT also saw higher rental from its Singapore hospitals due to the growth in minimum rent to S$52.7m in the 3rd year of lease (23 Aug 09 – 22 Aug 10), which increased by 4.36% based on the 1%+CPI growth rate rental calculation methodology.

DPU of 1.91 Scents. DPU grew by 11.6% yoy in 3Q09 to 1.91 Scents and up marginally from 1.89 Scents in 2Q09. Ex-date is 11 Nov and payable on 14 Dec.

Gearing remains at 23.3%, good debt headroom. PREIT’s gearing remains low at 23.3%, which allows for additional debt of S$301.3m and S$989.8m before it reaches 40% and 60% gearing respectively. Available sources of funds remains diversified ranging from a S$500m MTN facility, S$126m untapped bank facilities and S$50m 3-year revolving Murabaha facility.

Recommendation

Stable growth with acquisitions. As per our report on 24 Sep 09 (Poised to acquire), we still continue to expect management to deliver acquisitions in the near term, to further enhance growth, which will be funded via debt.

Retain Buy, TP unchanged at S$1.37. We retain our recommendation, in view of its defensive features (96% of total portfolio with downside rental protection), upside rental growth with CPI-linked revisions and opportunity for growth via acquisitions. Our TP is S$1.37 based on DCF (WACC 6.6%).