Parkway Life REIT (SGX: C2PU)’ DPU Up 3.3%

Parkway Life REIT (SGX: C2PU) is a leading healthcare-focused REIT in the Asia Pacific region. Over the years, the REIT has shown consistent growth and resilience, driven by its strategic investments in healthcare assets and prudent financial management. The REIT has recently announced its first half 2023 business performances, we will look into it in more details in this article.

Financial Performances

DPU and Yield

For the first half of 2023, Parkway Life REIT declared a DPU of 7.29 cents. Compared to the corresponding period in 2022, where DPU stood at 7.06 cents, the current DPU shows an increase of 0.23 cents or 3.3%, reflecting positive growth in income distributions. This was contributed by higher rent from Singapore hospitals and additional revenue from new properties acquired in 2022.

The REIT has delivered an impressive DPU growth since its IPO, an increase of 127.5% since 2007.

With the DPU of 7.29 cents and a closing market price of $3.88 as of 31 July 2023, the annualised yield for Parkway Life REIT stands at approximately 3.8%.

Gearing

Its Aggregate Leverage ratio was 35.3%, a slight decrease from 36.4% at the end of 2022. This is at the low side compared to the industry average, which indicates that the REIT has managed its borrowings prudently, reducing potential refinancing risks and enhancing financial stability.

Interest Coverage

With an interest coverage ratio of 13.8 times as of 30 June 2023, Parkway Life REIT demonstrates a strong ability to meet its interest obligations, which indicates sound financial management and reduced financial risk.

Price to Book

With a net asset value per unit of $2.33 and a closing market price of $3.90 as of 30 June 2023, the price to book ratio is approximately 1.67. Historically, the REIT has been always trading at its premium relatively to its net asset values.

Growth Prospects:

Expanding Healthcare Industry:

The Asia Pacific region is witnessing a growing demand for high-quality healthcare services due to an aging population and increasing healthcare needs. Parkway Life REIT’s strategic focus on healthcare assets positions it well to benefit from this trend. The REIT’s investments in hospital properties, nursing homes, care facilities, and medical center units in Singapore, Japan, and Malaysia offer diversified exposure to the region’s burgeoning healthcare market.

Project Renaissance:

Parkway Life REIT’s ongoing major refurbishment works, named “Project Renaissance,” at Mount Elizabeth Hospital (MEH) in Singapore, is expected to enhance the hospital’s facilities and services. Upon completion, MEH is likely to attract a larger patient base and potentially increase rental income for the REIT. This project signifies Parkway Life REIT’s commitment to maintaining its assets at the forefront of healthcare standards.

Acquisitions and Portfolio Growth:

The REIT’s history of strategic acquisitions has bolstered its portfolio and income streams. Recent acquisitions of nursing home properties in Japan and continued investments in high-quality healthcare assets demonstrate Parkway Life REIT’s proactive approach to growth. The REIT’s strong relationships with established healthcare operators enable it to identify attractive acquisition opportunities.

Margin of Safety:

Strong Financial Metrics:

Parkway Life REIT’s Aggregate Leverage ratio of 35.3% and interest coverage ratio of 13.8 times indicate a healthy financial position. The REIT’s disciplined approach to debt management and sound interest coverage provide a margin of safety against potential financial risks.

Conservative Debt on Assets:

Parkway Life REIT’s conservative debt on assets ratio signifies a prudent balance between equity and debt financing. This approach reduces the REIT’s vulnerability to economic downturns and ensures the stability of its investment portfolio.

Diversified Portfolio:

The REIT’s portfolio spans multiple countries and healthcare segments, reducing concentration risks. This diversification minimises the impact of regional economic fluctuations and potential disruptions in specific healthcare sectors.

Summary

Parkway Life REIT presents an appealing investment opportunity with promising growth prospects and a robust margin of safety. The REIT’s strategic focus on the healthcare industry, ongoing expansion projects, and prudent financial management position it for continued success. We think that investors seeking stable income, portfolio diversification, and exposure to the growing Asia Pacific healthcare market may want to consider Parkway Life REIT as a long term investment opportunity.