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Friday, November 19, 2021

Parkway Life REIT Review @ 19 November 2021

Basic Profile & Key Statistics

Parkway Life REIT (PLIFE) is a healthcare REIT that invests mainly in hospitals, medical centres and nursing homes. PLife owns 55 properties across Singapore, Japan and Malaysia.

Performance Highlight

Besides NPI, the performance improved slightly YoY. The decrease in NPI is mainly due to a one-off allowance for doubtful debts of $1.1 million due to rent default.

PLIFE has completed the acquisition of 2 nursing homes in Japan on 9 July 2021.

For the master lease agreements with Parkway Hospitals Singapore Pte. Ltd., PLIFE received unitholders approval at EGM on 30 Sep, and subsequently entered into the new master lease agreement on 13 Oct. This has increased the WALE as well as the valuation of the Singapore properties.

Related Parties Shareholding

  • REIT sponsor's shareholding is high at 35.56%
  • REIT manager's shareholding is low at 0.311%
  • Directors of REIT manager's shareholding is high at 0.16%

Lease Profile

  • Occupancy is high at 99.7%
  • WALE is long at 5.36 years, it is extended to 17.42 years after the master lease renewal on 13 October.
  • Highest lease expiry within 5 years is high at 59.1% which falls in 2022. The master lease has renewed on 13 October and the highest lease expiry within 5 years is low at 2.1%.
  • Weighted Average Land Lease Expiry is sightly long at 73.96 years

Debt Profile

  • Gearing ratio is slightly low at 34.9%
  • Cost of debt is low at 0.53%
  • Fixed rate debt % is slightly low at 70%
  • All debts are unsecured debt
  • WADM is moderate at 2.9 years. post refinancing, the WADM is long at 3.6 years
  • Highest debt maturity within 5 years is low at 22.5% which falls in 2022. Post refinancing, highest debt maturity within 5 years is low at 23%, which falls in 2026
  • Interest coverage ratio is high at 21.6 times

Diversification Profile

  • Top geographical contribution is moderate at 58.8% 
  • Top property contribution is high at 35.6% 
  • Top 5 properties contribution is moderate at 63% 
  • Top tenant contribution is high at 58.8% 
  • Top 10 tenants contribution is high at 84.7%

Key Financial Metrics

  • Property yield is slightly high at 5.5% 
  • Management fees over distribution is slightly high at 14.9% in which unitholders receive S$ 6.71 for every dollar paid 
  • Distribution on capital is high at 4.2%
  • Distribution margin is high at 70.6%

Trends

  • Uptrend - DPU, NAV per Unit, Interest Coverage Ratio
  • Flat - Distributon Margin
  • Downtrend - Property Yield, Distribution on Capital

Relative Valuation

  • P/NAV - Average for 1y; Above +1SD for 3y and 5y
  • Dividend Yield - Below -1SD for 1y, 3y and 5y

Author's Opinion

 Favorable Less Favorable
High REIT Sponsor's ShareholdingHigh REIT Manager's Shareholding
High Directors of REIT Manager's ShareholdingHigh Top Property Contribution
High OccupancyHigh Top Tenant & Top 10 Tenants Contributions
Long WALEProperty Yield Downtrend
No major expiry within 5 years (post renewal)Distribution on Capital Downtrend
Low Cost of Debt 
100% Unsecured Debt 
Long WADM (post refinancing) 
Well Spread Debt Maturity 
High Interest Coverage Ratio 
High Distribution on Capital 
High Distribution Margin 
DPU Uptrend 
NAV per Unit Uptrend 
Interest Coverage Ratio Uptrend

PLIFE continues to deliver resilient results. The master lease renewal has uplifted the NAV by 20% 3Q and its sponsor has also granted PLife the ROFR over Mount Elizabeth Novena Hospital. With the guaranteed rental step-up of the new master lease, the performance is expected to improve moving forward.


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*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee accuracy, completeness, and reliability. It should not be taken as financial advice or a statement of fact. I shall not be held liable for errors, omissions and loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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