PARKWAYLIFE REIT (SGX:C2PU)
Parkway Life REIT - Still Growing
- ParkwayLife REIT's 1Q19 DPU of 3.28 Scts was in line at 25.2% of our FY19 forecast.
- Singapore underpinned by higher minimum rental guarantee; Japan lifted by new acquisitions.
- Maintain HOLD with an unchanged Target Price of S$3.05.
ParkwayLife REIT's 1Q19 results highlights
- PARKWAYLIFE REIT (SGX:C2PU) posted 1Q19 DPU of 3.28 Scts, up 3.5% y-o-y. This was achieved on the back of a 2.1%/2.2% y-o-y improvement in revenue/net property income to S$28.4m/S$26.5m, appreciation of the ¥ and lower funding costs. Portfolio NPI margin improved 0.2% pt to 93.5%.
- Distribution income rose 3.5% y-o-y to S$19.8m after accounting for S$0.75m of income retained for capital expenditure.
Boosted by higher Singapore and Japan
- The y-o-y rise in revenue was due to contribution from a nursing rehabilitation facility acquired in Feb 18 and higher income from Singapore properties.
- Net property income for Singapore rose 1.9% y-o-y to S$16.2m on the back of a higher minimum guaranteed rent for Singapore hospitals, which has been set at a higher 1.38% for the period of 23 Aug 2018 to 22 Aug 2019.
New acquisitions lifted Japan revenue
- ParkwayLife REIT derived c.39.6% of its 1Q19 revenue from Japan, which was 2% higher y-o-y, thanks to the additional contribution from the nursing rehabilitation centre acquired in Feb 2018. Its Japan portfolio is backed by a long weighted average lease term of 12.14 years.
Lowered overall funding cost; extended debt maturity profile
- ParkwayLife REIT has successfully refinanced all its ¥ debt due in 2020 and extended its debt maturity profile to 2025 as well as reduced its all-in cost of debt to 0.91%. About 88% of its interest rate is hedged.
- Gearing remains healthy at 36.4% providing the trust debt headroom to pursue inorganic growth opportunities.
Maintain HOLD
- We leave our existing forecast and DDM-based Target Price of S$3.05 intact. ParkwayLife REIT offers investors stable yield backed by its defensive income structure.
- ParkwayLife REIT is currently trading at 1.57x P/BV and offers a total return of c.9.5%. Hence, we maintain our HOLD recommendation.
- Key catalysts include accretive acquisitions while downside risks include deflationary periods where Singapore rent reviews would revert to 1%.
LOCK Mun Yee
CGS-CIMB Research
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EING Kar Mei CFA
CGS-CIMB Research
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https://research.itradecimb.com/
2019-04-26
SGX Stock
Analyst Report
3.050
SAME
3.050
