ParkwayLife REIT - UOB Kay Hian 2017-07-26: 2Q17 Results Of PREIT In-line

ParkwayLife REIT - UOB Kay Hian 2017-07-26: 2Q17 Results Of PREIT In-line PARKWAYLIFE REIT C2PU.SI

ParkwayLife REIT - 2Q17 Results Of PREIT In-line

  • Results of PREIT is in line with our expectations. 
  • Favourable rental lease structures (61% pegged to CPI-linked revision) under PREIT’s portfolio will continue to drive delivery of long-term fundamentals. 
  • Maintain BUY on PREIT with a target price of S$2.82.
  • Maintain OVERWEIGHT on the sector.


ParkwayLife REIT (PREIT) reported quarterly results.

  • 2Q17 DPU grew by 10.3% yoy to 3.32 S cents, driven by higher rents from properties in Singapore and divestment gains of S$5.39m from 4 Japanese properties. Core DPU, excluding divestment gains, grew by 2.9% yoy. 
  • Results were in line with expectations with 1H17 core DPU accounting for 52% of our full-year forecast. 
  • Maintain BUY with an unchanged target price of S$2.82, based on a two-stage dividend discount model (required rate of return: 5.9%, terminal growth rate: 1.8%). 

Marginal revenue and NPI growth. 

  • Growth in gross revenue and NPI were marginal, with increases of 1.1% and 1.4% qoq, respectively. 
  • Distributable income grew by 2.9% due to partial divestment proceeds from the 4 Japanese properties. The remaining divestment proceeds are to be distributed in the next two quarters of 2017.

Rent for Singaporean hospital properties to rise 1.27%. 

  • Based on the annual rent escalation agreement for PREIT's Singaporean properties, the rental rate effective from Aug 17 to Aug 18 is to rise 1.27% from the annual rent payable from Aug 16 to Aug 17.

Defensive hedging. 

  • PREIT has largely hedged their interest rate exposure and fully hedged their JPY net income until 1Q20.
  • Gearing remains constant at 37.4% with all-in cost of debt reduced to 1.1% from 1.4%.
  • PREIT has structured their refinancing such that there are no long-term debts to be refinanced until 2019.

Cautious optimism. 

  • Management opines that its portfolio's favourable rental lease structures (61% pegged to CPI-linked revision) will continue to drive the delivery of longterm fundamentals.

Vikrant Pandey UOB Kay Hian | 2017-07-26
UOB Kay Hian SGX Stock Analyst Report BUY Maintain BUY 2.820 Same 2.820