Parkway Life - Steadily Improving

Friday, August 21, 2009

PLife is one of a handful reits / business trusts to report a useful y-o-y increase in DPU: +13.9% to 1.89 cents from 1.66 cents a year ago, albeit unchanged from Q1. On an annualized basis, which is being conservative given the adjustment to revenue from the 3 Singapore hospitals for the next 12 months from Aug 23 rd , the yield is still an attractive 7%.

(The minimum guaranteed rent form Mt Elizabeth, Gleneagles and East Shore is set to increase by 4.6%, albeit lower than 6.25% for the current 12 months to Aug 22nd, following the 3.36% CPI in the past 12 months. The 3 Singapore hospitals presently account for 80% of total revenue of PLife.)

Gearing remains among the lowest at 22%, ie to reach 40%, debt headroom is $308 mln. (PLife was one of the few smart enough to make good use of the initial low gearing to make acquisitions in Japan via borrowings, specifically P-Life Matsudo for S$35 mln in May ’08, and at which it has just completed the first round of asset enhancement initiatives , converting a utility space to device manufacturing room for sub-lessee Inverness Medical Japan, at a cost of S$2.56 mln.)

We maintain BUY.

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