The net property income (NPI) margin remained stable at 93% despite higher expenses incurred for the Japan properties. This is a result of its properties being leased on a triple net basis, in which the lessees bear all property operating expenses. Distributable income grew a milder 16.6% to $11.4m as a result of higher financing cost due to acquisitions of the Japan properties in 2Q08 and 3Q08 being debt-funded.
Major refinancing risks will not kick in until Sep/Oct-2011. PREIT’s entire debt portfolio of $247.5m has a weighted average tenor of 2.4 years. Its effective interest cost of 2.89% is one of the lowest in the sector and is fixed for the next three years. Its low gearing of 23.3% leaves a debt headroom of $305.m before the 40%-gearing level is reached.
There is still potential for asset enhancement initiatives at its under-optimized pharmaceutical product distribution and manufacturing facility in Japan, which would not burden its balance sheet while providing a little upside to earnings. Otherwise, we should expect flatter yoy growth from the next quarter on, given the diminished effect of inorganic growth.
We believe PREIT is on track to deliver our forecast DPU of 7.1 cts as 93% of its leases are structured with downside protection to rent revenues. Our earnings estimates remain intact while target price has been raised to $1.09 from $0.94 to reflect the easing equity risk premium over the past 6 weeks. Maintain BUY.
Sponsored Links
Comments
No response to “Parkway Life REIT – No major refinancing risks until 2HFY11”
Post Comments (Atom)
Post a Comment |
Post a Comment