PLife – Phillip
2QFY10 Results
• 2QFY10 revenue of $18.7 million, net property income of $17.3 million, distributable income of $12.6 million.
• 2QFY10 DPU of 2.09 cents
• Maintain Buy, fair value of $1.66
Parkway Life REIT (Plife) registered 2QFY10 revenue of $18.7 million (+16.4% y-y, +0.5% qq), net property income of $17.3 million (+15.6% y-y, +0.6% q-q) and distributable income of $12.6 million (+10.9% y-y, +1.0% q-q). DPU for the quarter was 2.09 cents (+10.6% y-y, +1.0% q-q). The improved y-y performance is attributed to the contribution from acquisitions as well as the annual rent revision of the Singapore properties. For the annual Singapore properties rent revision, Plife announced that it will be revised up by 1.73% beginning 23rd August for the next one year. This is based on the CPI+1% formula which guarantees a minimum rent increase every year. Plife has been active on the acquisition trail, having made 14 purchases in the last year. It acquired eight nursing homes in November 2009 and another six nursing homes in June 2010. Post 2Q10, it made another purchase of 5 nursing homes which will contribute to 3Q10 revenue.
Since IPO, all of Plife’s acquisitions are in Japan and the portfolio now consists of 3 properties in Singapore and 29 properties in Japan. We view the Japan acquisitions positively given the high yield, low funding cost, which adds to the stability of the REIT. With a sizeable asset value of $400 million in Japan, we believe Plife will start consolidating its Japan properties and shift its expansion focus to other areas. Gearing of the REIT post the July acquisitions is 34.4% with total debt of approximately $460 million.
2Q10 results came in within our expectations. We are expecting revenue growth in 3Q10 to come from the revised Singapore annual rent as well as the contribution from the June and July acquisitions. We adjusted our FY10E DPU forecast up slightly from 8.4 cents to 8.6 cents to factor in the 20% of management fees paid in units versus our previous assumption of 100% cash. We still like Plife for the stability of its revenue stream. We maintain our Buy recommendation and fair value of $1.66.
Comments are Closed