PLife – CIMB

More legs to run

• Maintain Outperform with higher target price of S$1.91 (from S$1.57). PLife’s CPI-pegged Singapore assets are set to benefit from rising inflation, upcoming asset enhancement and overseas acquisitions. We factor in an additional S$200m of acquisitions for 2011, higher CPI assumptions, lower cost of debt and a longer lag time for contributions from 2010 acquisitions. Our DPU estimate dips by 5% for 2010 before rising by 4-20% for 2011-12. Our DDM target price rises accordingly to S$1.91 from S$1.57 (discount rate 7.2%). Earlier-than-anticipated announcements of acquisitions could provide stock catalysts, in our view.

• Singapore inflation to reach 3%. With the Singapore economy expected to expand 13-15% this year, inflation risks remain, auguring well for PLife’s Singapore portfolio, whose rental growth is pegged to CPI +1% in the base case. Our house predicts 3% inflation for Singapore this year.

• Organic growth in 2011. We believe asset enhancement at East Shore Hospital and Mount Elizabeth will start next year. Although details have not been released, we believe the AEI would centre on pockets of low-yielding space which could be converted to higher-yielding ward space, operating theatres or space for specialised use such as a cancer centre. We anticipate accretion for ROI in the region of 10% vs. its current NPI yields of 5%.