Healthy Distribution Growth at Parkway Life REIT

Parkway Life Real Estate Investment Trust (SGX: C2PU), or PLife REIT, released its full year results on Friday and posted a small 0.4% year-on-year decline in its annual gross revenue to S$94 million. Meanwhile, the REIT’s net property income was flat at S$88 million and its distribution per unit (DPU) managed a gain of 4% to 10.75 Singapore cents.

PLife REIT invests in real estate used mainly for healthcare and healthcare-related purposes. It has 44 properties in Singapore, Japan and Malaysia. In our shores, it owns Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital.

The REIT’s slight dip in revenue for the year was due mainly to “depreciation of the Japanese Yen offset by the revenue contribution from the properties acquired in 2012 and 2013, and higher rent from the existing properties”.

On the other hand, its DPU had managed to rise by 4% mainly due to acquisitions made in the past two years as well as higher rent from existing properties which were both offset somewhat by a one-off IRAS tax adjustment in 2012. Without the one-off adjustment, the growth in DPU would have been 5.5%.

As of 31st December 2013, PLife REIT’s balance sheet had weakened slightly from a year ago as its gearing level had increased from 32.9% to 33%. But, besides the increase in gearing, there were other aspects of its balance sheet that improved. For instance, the REIT’s debt had become cheaper as its cost of debt got lowered from 1.6% to 1.5%. Meanwhile, the REIT’s interest cover ratio had also become better as it went up from 8.8 times to 9.5 times.

Lastly, the REIT’s debt maturity profile has become a lot more smoothed out compared to a year ago, as shown below:

  Year ended 31 Dec 2012 Year ended 31 Dec 2013
Year when debt matures starting from reporting date Percentage of total debt coming due Percentage of total debt coming due
Year 1 2.9% 0.9%
Year 2 33.7% 31.9%
Year 3 41.9% 15.9%
Year 4 12.1% 17.2%
Year 5 9.4% 22.4%
Year 6 11.7%

Source: Parkway Life REIT earnings releases.

Three of the REIT’s properties – two in Japan and one in Malaysia –are currently undergoing asset enhancement initiatives (AEIs) which are expected to be done by the first quarter this year. PLife REIT has pegged the return on investments from its AEIs in the range of 10% to 21%.

Mr Yong Yean Chau, Chief Executive Officer of the manager of PLife REIT, commented on the REIT’s results, “Despite the challenging environment in 2013, we are pleased to be able to achieve steady growth in distributions to Unitholders, with the DPU for 4Q 2013 reaching 70.9% since our IPO. Our prudent financial management and strong balance sheet, combined with positive long-term prospects for the regional healthcare sector, position us well for continued growth”.

PLife REIT’s units closed at S$2.28 on Friday, giving it a price-to-book ratio of 1.4 based on its net asset value of S$1.60. The REIT’s units also have a trailing distribution yield of 4.7% based on its annual pay-out of 10.75 Singapore cents.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.