Parkway Life REIT - Results were largely inline

Parkway Life REIT reported gross revenue for 1QFY09 of $16.3 million (+37.6% y-o-y), net property income was $15.2 million(+36.6% y-o-y). Distributable income was $11.4 million(+16.6% y-o-y). DPU for the quarter was 1.89 cents (+16.7% y-o-y).

Results were largely inline with expectations as Plife REIT’s properties have strong and stable cash flow characteristics. Growth in revenue was mainly due to the annual increment in rents of 6.25% of the Singapore hospitals as well as contribution of revenue from the Japanese properties, which were acquired in 2nd and 3rd quarter of 2008.

Balance sheet remains healthy with gearing ratio of 23.0%, a slight decrease of 0.3%pt from 4QFY08, due to the depreciation of JPY. Correspondingly, asset value registered slight drop of 0.6% from the Japan properties. Plife REIT has total debt of $247.5 million, out of which $34 million denominated in S$ is due in the 2nd half of 2010. The rest are JPY denominated and due in the 2011.

Share price has run-up 20% since our previous recommendation. We maintain our positive call on Plife REIT and like it for the stable and resilient cash flows. We reiterate the defensive nature of the healthcare sector and the revenue model of the REIT whereby 93% of total portfolio (NLA) has downside revenue protection. We maintain our Buy recommendation with fair value of $0.95.

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