Parkway Life Reit

Parkway Life Reit: 3Q12 results inline. DPU was 7.5% higher yoy, at 2.58cts. NPI rose 9.5% yoy to $22.1m, boosted by contribution from its GMCKL Portfolio acq during the qtr. DMG tips revenue from Spore properties to grow by 6.3% over the next 12 mths. PREIT continues to roll out AEI opportunities for the assets under its portfolio. It is also exploring the option of engaging in asset recycling in Japan – divest the older or lower yield assets and replacing it with yield accretive assets. Such an option could allow PREIT to enhance the contribution from Japan assets, without expanding its Japan portfolio much. It also continues to be in discussions with its sponsor and other third parties to acq healthcare assets in Msia and Australia. Nevertheless, mgt prefers to adopt a cautious approach, and tips any acq, if at all, would likely be in 1H13. PREIT’s gearing of 36.4% with debt headroom of $229.2m (to reach 45%) places it in a good position to take on suitable acq. At $2.15, PREIT trades at 5.1% FY13e yield. The house keeps at Buy with TP $2.30.