Category: PLife
PLife – BT
PLife Reit’s Japan properties unaffected
IN AN update, the manager of Parkway Life Real Estate Investment Trust (PLife Reit) said yesterday that all its 30 properties in Japan were unaffected by the earthquake and tsunami that hit the nation last month.
‘The manager, together with our Japan asset managers and operators, have conducted further checks on our properties in Japan. We are pleased to confirm that none of our Japan properties have been structurally affected and that business at all 30 properties continue to be in operation,’ Parkway Trust Management said in a release to the Singapore Exchange (SGX) yesterday, adding that it will continue to monitor the situation.
In an earlier statement to SGX on March 13, PLife Reit’s manager noted that most of the Reit’s Japan properties are located in the Kansai and Kyushu regions, which are relatively less affected.
‘Our nearest property to the nuclear plant site (is) at least 200 kilometres away,’ it said.
Separately, it was also announced to SGX yesterday that Pulau Memutik Ventures Sdn Bhd had acquired the total issued share capital of Integrated Healthcare Holdings (IHH) from Malaysia’s sovereign wealth fund Khazanah Nasional Bhd on March 29. IHH – via indirect wholly owned subsidiaries Parkway Trust Management and Parkway Investments – holds around 216.81 million units of PLife Reit. As such, Pulau Memutik holds a deemed stake of 35.84 per cent in PLife Reit.
SREITs – OCBC
Impact of Japan’s earthquake & tsunami
Residential REITs. Saizen REIT (Not Rated), with 146 properties all over Japan, will be the most affected S-REIT, in our opinion. The impacted region includes the cities of Sendai with 22 properties, Koriyama and Morioka with three properties each, making up 15.5% of its portfolio value (PV). Most notably, Sendai (nearest quake epicenter) constitutes 11.2% of Saizen’s total portfolio value and 10.6% of rental income. The full extent of the damage is still unknown as access to these areas has been cordoned off due to safety concerns.
Industrial REITs. MLT has 14 properties in Japan (26.4% of PV) of which 13 escaped with either no damage or minimal damage. Sendai Centre (2-storey chilled and frozen facility, contributing 0.75% of PV & 0.7% of MLT’s gross revenue), is located along the coastal area of Sendai, and appears to be most affected. However, the full extent of damage can only be ascertained when access into the property is allowed. The total cost of reinstating the building is ~S$9m (0.37 S-cents per unit), but MLT does not expect the cost of repairs will come to this amount. We place our BUY rating and fair value of S$1.03 under review pending more updates and clarity from management. AAREIT (Not Rated) also has a warehouse at Saitama (4% of PV) to be sold pending sale completion in Mar 2011. AAREIT has announced that there appears to be no structural damage to the property.
Office REITs. FCOT has three commercial properties in Tokyo and Osaka (6.9% of PV). We understand from the manager that all properties are away from the affected areas and thus did not suffer any damages. With FCOT’s limited exposure in Japan, we maintain our BUY rating and fair value of S$0.92.
Retail REITs. Starhill Global REIT has seven malls in Tokyo (6.6% of PV, 4.6% of total gross revenue). The manager has stated that there is no known damage to the malls. In addition, the properties were also partially covered by earthquake insurance (unlike properties in other REIT subsector), providing some form of assurance for unitholders. We expect retail sales in Japan to be impacted somewhat but maintain our BUY rating and target price of S$0.74.
Taking a cautious stance. Nevertheless, we remain cautious as events in Japan are still unfolding and at this stage, it is hard to predict the extent to which the quake and the nuclear fallout will hurt the economy. There is also the possibility of more quakes (likely 7.0 or higher magnitude), aftershocks and even tsunamis taking place in the coming days.
REITs (Japan Assets) – BT
S’pore Reit buildings in Japan get away lightly
The damage unleashed by the earthquake and tsunami on the north-eastern coast of Japan has left most of the properties owned by Mapletree Logistics Trust, Parkway Life Real Estate Investment Trust (Reit) and Global Logistic Properties (GLP) relatively unscathed.
Mapletree Logistics Trust said yesterday that 13 out of its 14 properties in Japan ‘escaped with either no damage or minimal damage’. Its remaining property in Sendai – where devastation has been greatest – Sendai Centre, has been affected by the tsunami, the trust said.
The latest valuation has put the cost of reinstating the building at about 600 million yen, or about S$9 million. The trust’s manager, however, does not expect the cost of repairs to amount to that much.
‘Preliminary report suggests that the building is intact. However, the affected area has been cordoned off by the local authorities due to safety measures. The full extent of damage can only be ascertained when access into the property is allowed,’ the trust said in a filing on the Singapore Exchange yesterday.
Sendai Centre is the second smallest of the trust’s properties in Japan by revenue contribution, accounting for 0.7 per cent of its portfolio’s total gross revenue.
On Friday night, GLP said that damage to its property had been estimated at about 3.9 billion yen or US$47.5 million, with the likely loss of rental income coming up to 0.89 billion yen or US$10.8 million. In total, this accounts for less than one per cent of GLP’s US$6.3 billion portfolio of properties in Japan. The majority of the repairs to its properties will take place in the next 30 days.
‘The low level of losses are testimony to the quality of our portfolio and property management as well as the rapid response of our dedicated team in Japan,’ said Jeffrey Schwartz, deputy chairman of GLP, who had been visiting the operations in Japan when the earthquake took place.
Parkway Life Reit, which has 29 properties in Japan, said that none of them have been structurally affected. ‘In addition, none of our properties are located within the evacuation zones of the nuclear plants in Fukushima Prefecture, with our nearest property to the nuclear plant site at least 200 kilometres away,’ it said yesterday.
Saizen Reit, a firm with 22 properties in Sendai alone, said on Friday night that its manager, Japan Residential Assets Manager Limited, and asset manager, KK Tenyu Asset Management, were contacting local property managers to assess the extent of the impact, but that it was being hampered by ‘breakdown of telecommunications networks and power blackouts’.
The collective value of its properties in the three affected areas – Sendai, Koriyama and Morioka – stand at 5.88 billion yen, accounting for 15.5 per cent of its total portfolio value.
Mapletree Logistics Trust, Parkway Life Reit and GLP have said that all their staff in Japan are safe and accounted for.
Healthcare REITs – OCBC
Robust outlook underpinned by strong growth drivers
Positive 4QFY10 results. Currently, there are only two healthcare REITs listed on SGX. They are First REIT (FREIT) [BUY, FV: S$0.80] and Parkway Life REIT (PLREIT) [NOT RATED]. FREIT and PLREIT both reported a respectable set of 4QFY10 results recently. FREIT’s growth was largely driven by higher rental income from its Indonesian properties; while PLREIT registered a 16.1% YoY increase in DPU to 2.38 Scents as a result of higher rent from its Singapore hospitals and contribution from the 11 Japan nursing homes acquired in 2010.
Favourable stable and long master leases. Both healthcare REITs function on long-term master leases that offer downside revenue protection, hence providing investors with stability. Moreover, there is also potential upside rental reversion that can be reaped. These master leases are important because the operations for healthcare REITs are specialised. Hence having the right operator/master lessee is critical as frequent turnover of operators would be very disruptive to operations.
Healthcare services as growth driver. Growth for Singapore’s healthcare REITs is driven by demand for healthcare and nursing home services. According to the Department of Statistics, Singapore’s private consumption expenditure on healthcare has increased at a CAGR of 8.8% to S$8.29b from 2006 to 2010. On the other hand, statistics from WHO revealed that Indonesia’s private expenditure on health grew at a CAGR of 12.7% to Rp45.3t from 2000 to 2008. We believe that such healthy growth trends are likely to continue, underpinned by strong fundamentals. These include Singapore’s aging population and influx of medical tourists; and Indonesia’s rising affluence which has increased demand for higher quality healthcare services. This would lend support to the rental income growth of PLREIT and FREIT.
OVERWEIGHT on healthcare REITs. We are OVERWEIGHT on healthcare REITs given their favourable master lease structure, strong sponsor support and optimistic outlook on the healthcare sector in Singapore and Indonesia. As seen from Exhibit 5, healthcare REITs on average command a higher yield and have a lower leverage ratio than their S-REIT peers, although their price-to-book ratio is higher. We believe this premium is justified due to the quality of assets owned and defensive nature of earnings which result in increased stability.
In terms of recent share price performance, PLREIT has increased 5.5% YTD while FREIT has risen 5.0% YTD, ranking them first and second respectively in the entire S-REIT universe (FSTREI Index has declined 2.1% YTD and STI Index has dropped 3.0% YTD). This corroborates the defensiveness of healthcare REITs in times of current market uncertainty.
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.