Simons Trading Research
Parkway Life REIT - 3Q18 In-line
- PLife REIT’s results were driven by higher rents from Singapore property.
- Maintain BUY with a target price of S$3.15.
ParkwayLife REIT's 3Q18 Results
Results in-line with expectations; maintain BUY
- Results in-line with expectations; maintain BUY with an unchanged target price of S$3.15, based on a two-stage dividend discount model (required rate of return: 6.1%, terminal growth rate: 2.4%).
- ParkwayLife REIT reported a 3Q18 DPU of 3.23 S cents down 4.1% y-o-y, due to the absence of one-off distribution gains. Stripping out the one-off gains, 3Q18 core DPU grew by 2.7% y-o-y, bringing 9M18 core DPU to 8.51 S cents (up 3.0%).
- 3Q18 gross revenue and NPI both grew by 2.5% y-o-y, underpinned by contributions from a nursing rehabilitation facility (acquired in Feb 18), as well as higher rent from Singapore properties (vs last year). Parkway East Hospital’s adjusted revenue outperformed its minimum guaranteed rent, contributing to the increase in revenue from Singapore.
- The results came in line with expectations, with 9M18 core DPU forming 74.9% of our full- year estimate.
Resilient portfolio performance
- Overall occupancy rate remained stable at 99.97% (flat q-o-q). Occupancies were maintained at 100% for Singapore, 100% for Japan, and 94% for Malaysia (excl. carparks).
Gearing improved marginally to 37.7% (vs 38.1% in 2Q18)
- The all-in effective cost of debt remained at 0.94% (+0.1ppt q-o-q), with debt maturity currently at 3.1 years and majority of the REIT’s debt due from 2020 onwards. At current debt levels, ParkwayLife REIT still has ample debt headroom of S$69.9m and S$240.8m before reaching 40% and 45% gearing respectively.
- The group has also continued hedging its Japan net income till 1Q23, which will ensure stability of distribution.
Long-term outlook continues to be driven by aging population (and demand for quality healthcare and aged care services)
- ParkwayLife REIT is also supported by favourable rental lease structures (at least 95% of its Singapore and Japan portfolios have downside revenue protection) and 62% of total portfolio is pegged to the CPI-linked revision formulae, allowing for revenue stability and growth amid uncertain market conditions.
Source: UOB Kay Hian Research - 26 Oct 2018
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