The downgrade is likely because of Plife’s sponsor Parkway Holdings’ massive hospital / medical centre project in Novena. Note the tender was secured in mid February ’08, at land cost of $1.246 bln, and development costs estimated at $300-500 mln.
(Note also the persistent concern over Plife’s “single customer exposure”, given its heavy dependence on lease income from the 3 Singapore hospitals, which are managed by Parkway Holdings: Mount Elizabeth , Gleneagles , and EastShore . Parkway Holdings owns 35.6% of PLife.)
Note that Parkway Holdings had on 31/3/08 announced a 7-for-15 rights issue at $2.18 to raise $760 mln to part finance the Novena acquisition. (30% of the 779,000 sf gross floor area is intended for medical suites, 36% for in-patient beds, 20% for diagnostic services , and the balance for retail & ancillary services.)
However, Parkway’s gearing remains high: at end Mar ’09, borrowings totaled $1,220.63 mln against shareholders funds of $1,370.68 mln. Cash amounted to $553.64 mln.
Any knee-jerk reaction, to say below 90 cents, would be an opportunity to buy more PLife units. BBB is still investment grade, albeit borderline case. At 95¢, annualised yield based on Q1 ‘09 payout is 8%.
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