PLife – Phillip

Company Overview

PLife REIT is one of the largest listed healthcare REITs in Asia by asset size. Its mandate is to invest in income-producing real estate and/or healthcare-related assets primarily used for healthcare and/or healthcare-related purposes in Singapore and Asia.

• 2Q12 revenue $23.4mn, NPI $21.4mn, distributable income $15.0mn
• DPU for 2Q12 at 2.48 cents
• Raise FY12-16 DPU by 1.1%
• Downgrade to Neutral on valuation ground despite higher target price of $2.010

What is the news?

PLife REIT reported another set of steady results, with DPU grew 4.6% y-y to 2.48 cents. The growth boiled down to the full quarter revenue contribution from the three Japan properties acquired in March 2012 and higher rent received from Singapore properties. The acquisition of strata titled units/lots within Gleneagles Medical Centre Kuala Lumpur (GMCKL), Malaysia was completed on 1 August 2012.

How do we view this?

2Q12 DPU was in-line with our expectation. The DPU for the first two quarters translated to 51% of our FY12 estimates. Revenue contribution from GMCKL will kick in from the forthcoming quarter.

Investment Actions?

Lower all-in interest cost, higher-than-expected annual rental revision for Singapore properties and AEI at Ishizugawa nursing home raised our DPU estimates by 1.1% on average for the next five years and our price target to $2.010. Despite the fundamentals are intact with sustainable and growing DPU, the stock price is nonetheless fairly valued on valuation ground. Dividend yield of 4.9% may not be sufficient to warrant an accumulate call and thus we downgrade our recommendation to neutral.