PLife – CIMB

Asset enhancements and acquisitions coming up

• Full-year above expectations; maintain Outperform. FY09 DPU met Street expectations but exceeded our expectations (109% of our estimate) due to lowerthan-forecast interest expenses. We maintain our FY10-11 estimates and introduce FY12 estimates. Our DDM-based target price is intact at S$1.57 (discount rate 7.2%). PLife REIT trades at 0.96x P/BV and a forward yield of 6.6%. Maintain Outperform on potential acquisition catalysts.

• Full-year DPU of 7.74cts (CIMB-GK 7.11cts). This represents a dividend yield of 5.8%. Net property income of S$62m for the full year was up 23% yoy following contributions from newly-acquired Japanese nursing homes in 2009 and higher rent from Singapore hospitals as a result of a high growth rate for the inflation-linked CPI +1% formula. Distributable income of S$46.7m and full-year DPU of 7.74cts increased 13% yoy to exceed our expectations following lower-than-forecast interest expenses. PLife’s REIT’s assets were revalued at S$1.15bn in Dec 09, gaining S$29m. NAV/unit in Dec 09 increased to S$1.39 (including distributable income) from S$1.34 in Dec 08.

• Asset leverage remained low at 28%. In 2H10, S$34m (10.5% of total debt) of debt will be due for refinancing. Management guides that new interest rates are likely to remain the same, if not lower. Interest cover remained high at 6.8x. Additionally, interest rates have been fixed for 100% of its debt, which eliminates uncertainties from fluctuating interest rates.

• Asset enhancements and acquisitions in 2010. Management will commence asset enhancement work, likely to concentrate in Singapore hospitals. Additionally, it will continue to look for accretive acquisitions in the region. We anticipate more acquisitions in Japan, and possibly Australia and Malaysia.