Parkway Life REIT - UOB Kay Hian 2018-10-26: 3Q18 In-line


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 port performance.

  • Overall occupancy rate remained stable at 7% (flat q-o-q). Occupancies were maintained at 1% for Singapore, 10% for Japan, and 94% for Malaysia (excl. carparks).

Gearing to 37.7% (vs 38.1% in 2Q18).

  • The all-in debt remained at 94% (+0.1ppt q-o-q), with debt maturity currently at 31 years and majority of the REIT’s debt 2020 onwards. At current debt levels, ParkwayLife still has ample debt before reaching 40% and 45% respectively.
  • The group has also Japan till 1Q23, which will ensure 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.

Peihao LOKE UOB Kay Hian Research | Andrew CHOW CFA UOB Kay Hian | https://research.uobkayhian.com/ 2018-10-26
SGX Stock Analyst Report BUY MAINTAIN BUY 3.15 SAME 3.15