PARKWAYLIFE REIT (SGX:C2PU)
Parkway Life REIT - Safety In A Storm
- Parkway Life REIT (SGX:C2PU)’s 1Q20 DPU of 3.32Scts was within expectations, at 25% of our FY20F forecast.
- Japan properties provided the main boost to 1Q20 earnings. This was further helped by the strengthening of its balance sheet metrics.
Plife REIT's 1Q20 DPU growth commendable despite setting aside some reliefs
- Parkway Life REIT reported a 5.2%/5.7% y-o-y increase in 1Q20 gross revenue/income available for distribution to S$29.9m/S$20.95m respectively. The improvements were achieved largely through additional contributions from the three Japan assets acquired in Dec 2019, the appreciation of the ¥ against the S$, and interest cost savings.
- However, 1Q20 distributable income to unitholders of S$20.9m and DPU of 3.32Scts were up a smaller 1.4% y-o-y, as Parkway Life REIT retained an additional S$0.85m for Covid-19-related relief measures.
- In all, Parkway Life REIT intends to set aside a total of S$1.7m for Covid-19-related relief measures to support its tenants across its portfolio.
New Japan properties boosted operational performance
- Singapore hospitals achieved a 1.9% y-o-y increase in 1Q20 NPI to S$16.5m with the new minimum rent increase of 1.61% kicking in from 23 Aug 2019 to 22 Aug 2020F. This continues to provide the trust with strong income visibility.
- Japan properties reported a 9.8% y-o-y expansion in 1Q NPI thanks to additional rental contributions from the three properties acquired in Dec 2019. We estimate that these new assets accounted for c.80% of the y-o-y growth in NPI.
Strengthened balance sheet with longer, lower cost debt
- Meanwhile, Parkway Life REIT continue to strengthen its balance sheet by extending its debt maturity profile to 2026F with no refinancing needed until Jun 2021F. Effective all-in funding cost declined to 0.63% at end-1Q20, following the extension of its interest rate hedges at a lower cost, and 89% of its interest rate hedged. It also secured a 6-year committed loan facility to term out its S$75.2m loan due in 3Q20F.
- Gearing stood at 38.5% at end-1Q20. Parkway Life REIT also has debt headroom of S$240m, assuming a gearing limit of 45%, to tap potential inorganic growth opportunities.
Maintain HOLD
- We tweak our FY20F DPU down by 1.1% to factor in the S$1.7m Covid-19-related reliefs set aside, partly offset by higher interest cost savings. Accordingly, our DDM-based Target Price remains unchanged at S$3.38.
- See Parkway Life REIT Share Price; Parkway Life REIT Target Price; Parkway Life REIT Analyst Reports; Parkway Life REIT Dividend History; Parkway Life REIT Announcements; Parkway Life REIT Latest News.
- While we like Parkway Life REIT for its stable yield backed by its defensive income structure, our recommendation remains a Hold given the 5.6% total returns potential based on the current share price.
- Upside risks include accretive acquisitions, while downside risks include deflationary periods whereby Singapore rent revisions would revert to 1%.
LOCK Mun Yee
CGS-CIMB Research
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https://www.cgs-cimb.com
2020-04-22
SGX Stock
Analyst Report
3.380
SAME
3.380
