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Parkway Life REIT’s Latest Earnings: What Investors Should Know

Parkway Life REIT (SGX: C2PU) released its third-quarter earnings report this morning.  The reporting period was from 1 July 2016 to 30 September 2016.

As a quick background, Parkway Life REIT is one of the largest listed healthcare real estate investment trusts (REIT) in Asia by asset size. At the local front, the REIT has ownership over three private hospital properties while overseas, it has stakes in 44 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.

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

Financial highlights

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

  1. Gross revenue rose to $28.1 million in the third-quarter, up 8.2% compared to the same quarter a year ago.
  2. For the reporting quarter, net property income (NPI) was also up 8.0%. NPI for the third-quarter came in at $26.2 million compared to the $24.3 million recorded a year ago.
  3. But, distribution per unit (DPU) for the reporting quarter fell 8.8% year-on-year to 3.06 cents. To be sure, the previous year included a divestment gain of 0.375 cents per share. If we back out the divestment gain, Parkway Life REIT’s DPU from recurring operations would have been up 2.5% year-on-year.
  4. As of 30 September 2016, Parkway Life REIT’s portfolio size is approximately $1.6 billion. The trust ended the reporting quarter with an adjusted net asset value per unit of $1.64, down slightly from the $1.66 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:

2016-10-27-parkway-life-reit-debt-table
Source: Parkway Life REIT’s earnings presentations

Parkway Life REIT’s effective all-in cost of debt had fallen from 1.5% a year ago to 1.4%. But, total debt rose to $678 million and the interest coverage ratio had dropped to 9.0 times. It’s worth noting that the REIT’s gearing had also moved closer toward the 45% regulatory limit.

The REIT also said that it had 98% of its debt hedged against interest rate fluctuations.

Operational highlights and a future outlook

The REIT’s Japan portfolio lead the way with a 19.2 % rise in sales over the previous year. Meanwhile the Singapore portfolio had a 1.8% increase in revenue during the same period.

Yong Yean Chau, the chief executive of Parkway Life REIT’s manager, shared his thoughts on the REIT’s outlook in the earnings release:

“This has been a tough year for the economy as investors are faced with uncertain market conditions and increased volatility. While we do expect some challenges in acquisition opportunities in the short to medium term, we continue to remain optimistic about PLife REIT’s prospects in the medium to longer term.

REITs have been viewed as safe and stable investments in this risk-off environment and we are further boosted by the resilience and defensiveness of the healthcare sector. We are always striving to build on our strong fundamentals and robust growth drivers, and these factors have allowed us to continue delivering healthy returns for our Unitholders.”

Units of Parkway Life REIT opened at a price of $2.55 each this morning. This translates to a historical price-to-book ratio of around 1.55 and a trailing yield of 4.9% per unit. Investors should note that the trailing DPU includes one 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.