ParkwayLife REIT - UOB Kay Hian 2017-07-26: 2Q17 Results Of PREIT In-line

PARKWAYLIFE REIT C2PU.SI

ParkwayLife REIT - 2Q17 Results Of PREIT In-line

Results of PREIT is in line with our expectations.
Favourable rental lease structures (61% pegged to CPI-linked revision) under PREIT’s portfolio will continue to drive delivery of long-term fundamentals.
Maintain BUY on PREIT with a target price of S$2.82.

2Q17 DPU grew by 10.3% yoy to 3.32 S cents, driven by higher rents from properties in Singapore and divestment gains of S$5.39m from 4 Japanese properties. Core DPU, excluding divestment gains, grew by 2.9% yoy.
Results were in line with expectations with 1H17 core DPU accounting for 52% of our full-year forecast.
Maintain BUY with an unchanged target price of S$2.82, based on a two-stage dividend discount model (required rate of return: 5.9%, terminal growth rate: 1.8%).

Growth in gross revenue and NPI were marginal, with increases of 1.1% and 1.4% qoq, respectively.
Distributable income grew by 2.9% due to partial divestment proceeds from the 4 Japanese properties. The remaining divestment proceeds are to be distributed in the next two quarters of 2017.

Based on the annual rent escalation agreement for PREIT's Singaporean properties, the rental rate effective from Aug 17 to Aug 18 is to rise 1.27% from the annual rent payable from Aug 16 to Aug 17.

PREIT has largely hedged their interest rate exposure and fully hedged their JPY net income until 1Q20.
Gearing remains constant at 37.4% with all-in cost of debt reduced to 1.1% from 1.4%.
PREIT has structured their refinancing such that there are no long-term debts to be refinanced until 2019.

Management opines that its portfolio's favourable rental lease structures (61% pegged to CPI-linked revision) will continue to drive the delivery of longterm fundamentals.

Vikrant Pandey UOB Kay Hian | http://research.uobkayhian.com/ 2017-07-26

UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 2.820 Same 2.820