Parkway Life REIT - CGS-CIMB Research 2020-04-22: Safety In A Storm


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

LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2020-04-22
SGX Stock Analyst Report HOLD MAINTAIN HOLD 3.380 SAME 3.380