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Parkway Life REIT’s Latest Earnings: Distributions Fall 7% But…

Parkway Life REIT (SGX: C2PU) released its fiscal first-quarter earnings report this morning. The reporting period was from 1 January 2016 to 31 March 2016.

Parkway Life REIT is one of the largest listed healthcare real estate investment trusts in Asia by asset size. The REIT has a portfolio with 48 properties in Singapore, Japan, and Malaysia that are collectively valued at S$1.7 billion. At the local front, the REIT has ownership over three private hospital properties.

You can read more about the REIT in here and here. You can also catch the results of the previous quarter in here.

Financial highlights

The following’s a quick take on Parkway Life REIT’s latest financial figures:

  1. Gross revenue rose to $26.9 million in the first quarter, up 8.6% compared to the same quarter a year ago. Parkway Life REIT had benefited from an asset recycling exercise in Japan.
  2. For the reporting quarter, net property income (NPI) was up 8.5% to $25.1 million.
  3. Parkway Life REIT’s distribution per unit (DPU) fell by 7% year-on-year to 2.99 cents per unit. To be sure, the previous year’s DPU had included a divestment gain of 0.375 cents per unit. If we back that out, the REIT’s DPU would have shown growth instead.
  4. The trust ended the reporting quarter with an adjusted net asset value per unit of $1.65, down slightly from the $1.68 seen a year ago.

Foolish investors might also want to keep an eye on the REIT’s debt profile. The debt profile may provide clues on how the REIT is funded and its sensitivity to the interest rate environment. These are summarised for Parkway Life REIT below:

Parkway Life REIT balance sheet (26 April 2016)
Source: Parkway Life REIT’s presentation

Parkway Life REIT’s debt-profile remains solid, with an effective all-in cost of debt of only 1.5% and an interest cover ratio of 8.9 times. Furthermore, there is no outstanding debt to worry about until the third-quarter of 2017. The REIT also said that it had hedged 98% of its debt against interest rate fluctuations.

Operational highlights and a future outlook

The REIT’s Japan portfolio led the way in NPI growth with a 21.1% jump over the same quarter in the previous year. The performance was boosted by higher yielding properties as part of the asset recycling exercise that Parkway Life REIT undertook in March 2015.

Parkway Life REIT also ended the quarter with a 100% committed occupancy for its portfolio.

Yong Yean Chau, the chief executive of the REIT’s manager, had the following thoughts to share on the reporting quarter:

“Despite market volatility, PLife REIT continues to deliver resilient results. Notwithstanding the overall DPU decline this quarter due to the absence of one-off divestment gains, our DPU from recurring operations continue to register an increase.”

He added some comments as well on the REIT’s future outlook:

“The healthcare industry continues to present pockets of opportunities, with population expansion and rising affluence being strong drivers of health spending. Going into FY2016, we remain cautiously optimistic and cognisant of challenges in acquisition opportunities given the market volatility. But we believe that our favourable rental lease structures and other robust fundamentals will continue to sustain long-term value for our Unitholders”

Units of Parkway Life REIT opened at a price of $2.42 this morning. This translates to a historical price-to-book ratio of around 1.9 and a trailing yield of 5.4% per unit. Investors should note that the trailing DPU includes three quarter’s worth of divestment gains.

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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 Chin Hui Leong owns units in Parkway Life REIT.