Tuesday, September 10, 2013

Healthcare REITs: Trading on rich valuations (OCBC)

Healthcare REITs: Trading on rich valuations
(Maintain NEUTRAL)
2H13 to be boosted by contribution from new acquisitions
Within the healthcare REITs space, both First REIT (FREIT) and Parkway Life REIT (PLREIT) recently reported 2Q13 results which were in-line with market expectations. Looking ahead, we expect 2H13 DPU to be boosted by new acquisitions. FREIT completed the purchase of two Indonesian hospitals from its sponsor Lippo Karawaci on 22 May this year, with an initial NPI yield of ~9.9%. A full quarter of contribution will kick in from 3Q13. For PLREIT, it completed the acquisition of two nursing homes in Japan on 12 Jul 2013, with the assets expected to generate an initial NPI yield of ~7.1%. Organically, PLREIT will also be able to obtain a higher rental increase of 4.44% (effective 23 August 2013 to 22 August 2014) for its Singapore hospitals, which is based on a CPI + 1% lease formula.


FX volatility has minimal impact on healthcare REITs
Although there has been heightened volatility in the IDR and JPY vis-àvis the SGD in recent months, this has minimal impact on healthcare REITs. For FREIT, the base rental for its Indonesian properties is denominated in SGD, while the variable rental component is pegged to a fixed SGD/IDR rate throughout the entire lease tenure. Although PLREIT’s 1H13 revenue fell 1.2% due to a weaker JPY, DPU still grew 4.5% as management had extended its JPY denominated net income forward hedge in 1Q12 for another five years until 1Q17. It also adopts a natural hedge strategy for its operations in Japan.

Mitigating Interest rate risks
Both healthcare REITs are cognizant of the negative impact that would result from a rising interest rate environment. Approximately 75% of PLREIT’s borrowings have been hedged as fixed rate debt. For FREIT, it announced on 28 Aug 2013 that it has successfully refinanced S$92m of its floating rate debt to a 4-year fixed-rate secured Transferable Term Loan Facility (TLF). We estimate that this would lower FREIT’s floating rate exposure from 72% to 46% of its total debt.

Debt maturity profile still healthy
Following this successful refinancing exercise, FREIT’s next refinancing need will only come in 2016, thus providing stability to its unitholders. Meanwhile, PLREIT recently secured a five-year committed and unsecured JPY bank loan to refinance 65% of its debt (S$95.1m) due in 2014. With this exercise, only 11.4% of its total borrowings will mature in 2014, although management would still have to address S$182.1m of debt (40.6% of total borrowings) which is due in 2015.

Maintain NEUTRAL
We maintain NEUTRAL on the healthcare REITs sub-sector given its pricey valuations (P/B of 1.30x, versus S-REITs universe’s 0.97x average) and negative sentiment surrounding interest rate sensitive instruments given concerns that the tapering of quantitative easing may be announced at the next FOMC meeting in mid-Sep.



Source/Extract/Excerpts/来源/转贴/摘录: OCBC-Research,
Publish date: 09/09/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
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做自己熟悉的事,等到发现大好机会才投钱下去

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“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
冷眼(冯时能)投资概念
“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
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每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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