CIMB RESEARCH on 26 Jan 2013
Q4/FY12 NPI (net property income) and DPU (distribution per unit) grew 6.1 per cent/7.6 per cent and 9.5 per cent/7.5 per cent y-o-y respectively, propped up by Japan and Malaysia acquisitions and rent review on Singapore hospitals.
Singapore and Japan NPI margins inched up last year to 95 per cent and 87 per cent (FY11: 94 per cent and 86 per cent), supported by higher rent from existing properties.
Forty-nine point seven million dollars of revaluation gains on investment properties were booked on incorporation of the latest consumer price index (CPI) increase on Singapore hospitals (+6 per cent revaluation gain to Singapore assets).
A weaker yen resulted in circa -14 per cent downward revaluation to Japan assets, but offset by matching yen-denominated liabilities.
The management continues to embark on Japan asset enhancement initiatives (AEIs), with the sixth AEI completed in Q4 generating ROI (return on investment) of 10 per cent.
We expect more of this to come, a positive, but for growth to be largely underpinned by rent adjustments on the back of inflation pressures in Singapore and on acquisitions.
While trading at a steep 1.5 times P/B, the stock is supported by the certainty of revaluation gains on the Singapore portfolio on the back of strong rental adjustments for the CPI-pegged leases for the next two to three years and normalised inflation rates thereafter.
FY12 dividend yield of 4.5 per cent and the potential for DPU growth of 6 to 8 per cent over FY13/14 warrants holding on to the stock, in our view. We maintain our "neutral" call on limited upside.
NEUTRAL
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