Parkway Life REIT - UOB Kay Hian 2021-07-15: Comprehensive Strategic Collaboration That Surpasses Our Expectations

PARKWAYLIFE REIT (SGX:C2PU) | SGinvestors.io PARKWAYLIFE REIT (SGX:C2PU)

Parkway Life REIT - Comprehensive Strategic Collaboration That Surpasses Our Expectations




Parkway Life REIT has extended its strategic collaboration with sponsor IHH Healthcare


Extension for 20 years with sizeable step-up in rents.

  • Parkway Life REIT (SGX:C2PU) has entered into a lease framework agreement for the extension of master leases of its three Singapore hospitals, namely Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital. The initial rent for 2023 is S$97.2m, supported by rental valuations conducted by CBRE and Knight Frank.
  • Cumulatively, total rental growth is 39.4% for Year 4 of the 20-year lease term. Rental escalation is set at CPI + 1% from Year 4 to Year 20.
  • Parkway Life REIT's WALE has increased from 5.7 years to 16.6 years. There is also an option to renew for a further 10 years (2043 to 2052).

Renewal that enhances capital values.


Potential injection of Mount Elizabeth Novena Hospital.



STOCK IMPACT


Win-win outcome facilitates future collaborations.


Strong positive impact on DPU and NAV per unit.

  • On a pro forma basis, management estimates positive unit is estimated to increase by 19.9% to S$2.35 in Year 1 and a further 6% to S$2.49 in Year 4.


EARNINGS REVISION

  • We forecast Parkway Life REIT to provide
    • DPU of S$0.152 for 2023 (Year1),
    • DPU of S$0.154 for 2024 (Year2),
    • DPU of S$0.157 for 2025 (Year3) and
    • DPU of S$0.187 for 2026 (Year4).


VALUATION & RECOMMENDATION



SHARE PRICE CATALYST

  • Extension of leases for Singapore hospitals.
  • Yield-accretive acquisitions.





Jonathan KOH CFA UOB Kay Hian Research | https://research.uobkayhian.com/ 2021-07-15
SGX Stock Analyst Report BUY MAINTAIN BUY 4.72 UP 4.380



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