PLife – Lim and Tan

Humming Along Nicely

• Distributable income rose 1% sequentially (and 11% y-o-y reflecting contributions from the nursing homes in Japan acquired since 2008) to $12.62 mln or 2.09 cents per unit. (PLife now owns 24 nursing

homes and other healthcare-related assets in Japan, representing 37% of total revenue.)

• On an annualized basis, that translates to 5.8% yield. Price / NAV is 1.04x. Gearing is a comfortable 32.6%.

COMMENTS

1. We maintain BUY even though the healthcare reit is at a record high. (It hit $1.50 on Aug 2.)

2. PLife has become even more “transparent” with more disclosures.

3. It is comforting to know that despite several acquisitions in Japan, 88.1% of PLife’s revenue has “downside protection”, ie not just the 3 Singapore hospitals, where minimum revenue is set to grow by 1.73% from Aug 23rd ’10 – Aug 22nd 2011 under the arrangement with Parkway Holdings: annual rental to grow by at least 1% + CPI.

4. PLife expects to complete in the current quarter the refinancing of 46.1% of its total existing loans (or S$207 mln), likely at even lower interest rates, given the anemic economic growth in Japan.

5. We also believe PLife offers an attractive alternative to Parkway, which Khazanah may well end up taking full control of, given the “rich” valuation that its $3.95 a share offer represents. Expectation is for Khazanah to then raise hospital charges here, which can only be good for PLife. (Parkway owns 35.77% of PLife.)

6. This could also result in more acquisition opportunities for PLife, for which PLife has ample “debt headroom”: $122 mln and $835 mln before gearing hits 40% / 60% respectively.