REIT-TIREMENT - REIT Investing and Personal Finance

A blog about REIT investment and personal finance

Friday, October 04, 2019

Healthcare SREITs - Parkway Life REIT vs First REIT

Previous post we compare Logistics SREITs, this time we would compare Healthcare REITs. As this moment, there are only 2 healthcare SREITS which are Parkway Life REIT and First REIT, very limited choices.
In my view, investors are more lean towards Parkway for its increasing DPU and share price as well as 3 renown hospital properties in Singapore. As for First REIT, investors are concern about its sponsor and near term expiring lease which post a risk of renewal with Indonesia Rupiah currency rental or lower rental rate.
Refer below comparison, as per 30th June 2019 Result:
Items Unit First Plife
Lease Profile
Portfolio Occupancy % 100 100
Income Received in SGD % 99.37 60.27
Highest Lease Maturity in 5 Years* % 22 59.79
Weighted Average Lease Expiry, WALE* year 8 6.66
Weighted Average Land Lease Expiry* year 64.4 74.6
Debt Profile
Interest Cover Ratio time 6.06 12.21
Cost of Debt % 3.75 1.05
Fixed Debt over Total Debt % 71.42 95.07
Unsecured Debt over Total Debt % 20.15 100
Gearing Ratio* % 34.5 36.9
Highest Debt Expiry in 5 Years* % 40.4 29.3
Weighted Average Debt Expiry* year 2.51 3.1
Diversification Information
Major Sector Contribution % 96.47 100
Top Geographical Location Contribution % 34.44 60.27
Top Property Contribution % 18.81 37.32
Top Tenant Contribution % 82.05 60.27
Top 10 Tenants Contribution % 100 88.75
Share Related Information
REIT Manager's Shareholding* % 0.994 0.354
QoQ Dilutive Shares Increase % 0.24 0
Financial Metrics
Property Yield (Annualized) % 8.44 5.89
Distribution on Management Fees time 6.03 6.93
Distribution on Capital (Annualized) % 5.11 4.49
Distribution Margin % 58.51 70.2
Support over Distribution % 0 0
Growth Profile
QoQ NAV per Unit Growth % 0.12 1.13
QoQ DPU Growth % 0.13 0.36
QoQ Interest Cover Ratio Growth % -0.38 2.42
QoQ Property Yield Growth % -0.04 -0.5
QoQ Distribution on Capital Growth % -0.31 -0.59
QoQ Distribution Margin Growth % -0.18 -0.2
Note:
i) Value without * is weighted average value for past 5 years, may be adjusted due to acquisition/disposal, equity fund raising or any events that affect average value drastically.
ii) All information are based on best effort without any guarantee on accuracy & reliability.

Summary:
1) Lease Profile Winner - First
2) Debt Profile Winner - Parkway
3) Diversification Profile Winner - First
4) Share Related Profile Winner - Tied
5) Financial Metrics Winner - Tied
6) Growth Profile Winner - Tied
7) Overall with Most Green - Parkway

Again, we apply the Relative Valuation Analysis method, we would get the below result:
1) First REIT - $ 1.14 to $ 1.28 (Current: $ 1.02)
2) Parkway Life REIT - $ 2.59 to $ 2.80 (Current: $ 3.14)

Parkway Life REIT price is always at premium, its DPU and NAV have been increasing consistently throughout past 5 years. It is also the only SREIT that never increase any outstanding share since 2012. Whereas for First REIT, its share price plunges after downgrade of its sponsor credit rating at 2018, despite there is no change in fundamental.

So whether to buy a "safer" one (as it seems) at 4.2% yield ? Or take some risk for 8.4% yield? The choice is up to individual risk profile and belief. But let's take a step backward and think, if all those First REIT concerns have been cleared, can we still buy it at current price?
Every risk is an opportunity ? or Trap ?
It is too bad that at this moment, we do not have any choice of "intermediate" healthcare REIT at 6+%. Hopefully in the near future, there can be more healthcare REIT listing in SGX.

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