PLife – Phillip

FY10 Results

•4Q10 revenue $21.5m, NPI $19.7m, distributable income $14.4m

•FY10 full year revenue $80.0m, NPI $73.6m, distributable income $53.2m

•4Q09 DPU of 2.38 cents, bringing full year DPU to 8.79 cents.

•Property portfolio asset size increased 13%, backed by acquisition and revaluation gain

•Buys another nursing home in Japan

•Maintain hold recommendation, target price $1.82

Results slightly ahead of expectations

Plife REIT reported 4Q revenue of $21.5 million (+1.5% q-q, +21.1% y-y), net property income of $19.7 million (+1.2% q-q, 19.5% y-y), distributable income of $14.4 million (+6.0% q-q, +16.6% y-y). For the full year, revenue was $80.0 million (+20.0% y-y), net property Income was $73.6 million (+18.8% y-y), distributable income was $53.2 million (+13.8% y-y). DPU for 4Q10 was 2.38, bringing full year DPU to 8.79 cents. Results came in close to our forecast. Revenue and DPU were both 2.3% higher than our numbers. The strong y-y performance stems from both organic growth and inorganic expansion. Organically, rental from the Singapore hospitals portfolio had an upward revision of 1.73%. Inorganically, Plife REIT purchased 11 nursing homes in Japan during the year. Bottom line was also boosted by lower refinancing rate. Percentage revenue contribution from Singapore and Japan are 66% and 34% respectively, compared to 77% and 23% in 2009.

Growing asset size

Portfolio asset value increased from 13% to $1.3 billion as Plife REIT expanded its portfolio. Revaluation surplus added $18.7 million to the portfolio asset value. The portfolio consists of 3 Singapore hospitals and 28 Japan properties (27 nursing homes, 1 pharmaceutical products distribution facility). Portfolio asset value breakdown is 67% Singapore and 33% Japan. Total debt as at 31 Dec 2010 was $467.5 million with a gearing of 34.6%. Debt maturity profile is well spread out with 10.7%, 41.1% and 48.2% maturing in 2013, 2014 and 2015 respectively.

Continues expansion in Japan

Plife REIT made its first acquisition in 2011. Building on its relationship in Japan, the REIT bought another nursing home on 21 January 2011 for a consideration of $8.9 million. The acquisition is debt-funded and we estimated post acquisition gearing will increased slightly to 34.9%. Plife REIT performed credibly in 2010 and results came in close to our forecast. We have all along been a proponent of the value of Plife REIT, citing its stable revenue as a strong merit. In our view, expansion is good, but up to a certain limit inherent risk increases as well. Our main bugbear is on the rising gearing. With the latest purchase, gearing rises to 34.9%. We are comfortable up to 40% which we think would warrant some form of equity fund raising. We are factoring in the contribution from the new purchase and raising our target price to $1.82. We have a forecasted FY11E DPU of 9.76cents which translate to a dividend yield of 5.4%. Maintain hold recommendation.