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Parkway Life REIT’s Latest Earnings: Look Beyond The 9.2% Decline In Its Distribution

Parkway Life REIT (SGX: C2PU) released its earnings report for the quarter and year ended 31 December 2016 this morning.

As a quick background, Parkway Life REIT is one of the largest listed healthcare real estate investment trusts (REITs) in Asia by asset size. In Singapore, the REIT has ownership over three private hospital properties. Meanwhile, it has stakes in 40 healthcare-related assets in Japan and 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 its previous quarter in here.

Financial highlights

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

  1. Gross revenue was at $27.7 million in the fourth quarter, up 5.4% compared to the same quarter in 2015. For 2016, revenue was up by 7.2% to $110.1 million.
  2. For the reporting quarter, net property income (NPI) grew 4% year-on-year to $25.6 million. For the full year, NPI was up 6.7% to $102.4 million.
  3. The REIT’s distribution per unit (DPU) for the reporting quarter was down 9.2% year-on-year to 3.06 cents. But, the decline was due to an additional 0.375 cents per unit of divestment gain which was included in 2015’s fourth quarter. If we back out the divestment gain, the REIT’s recurring DPU actually made a modest 2.2% gain. For the full year, DPU was down 8.8% to 12.12 cents. Again, excluding 2015’s divestment gain, Parkway Life REIT’s DPU in 2016 would have been up 2.8% compared to 2015.
  4. As of 31 December 2016, the REIT’s portfolio size is at $1.7 billion. The trust ended the reporting quarter with an adjusted net asset value per unit of $1.68, up slightly from the S$1.66 seen a year ago.

Foolish investors may 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. Here’s a summary of Parkway Life REIT’s current debt profile and how it has changed over the past year:

2017-01-25 Parkway Life REIT
Source: Parkway Life REIT’s earnings presentations

Parkway Life REIT’s debt profile remains solid, with an effective all-in cost of debt of just 1.4% and a healthy interest cover ratio of 8.7 times. There is also minimal outstanding debt in 2017. The REIT shared too that 99% of its debt is hedged against interest rate fluctuations.

Operational highlights and a future outlook

Parkway Life REIT’s Japan portfolio lead the way in terms of growth with an 8.8% increase in NPI.

Yong Yean Chau, the chief executive of the REIT’s manager, shared the following comments in the earnings release regarding the REIT’s reporting quarter and outlook:

“For the year, the Group had remained steadfast in ensuring well insulated earnings for the Unitholders as we proactively engaged in prudent financial and risk management and strengthened the portfolio mix, amidst the macro economic uncertainties. Building on our sound fundamentals and defensive position, we remain vigilant in screening for compelling investment opportunities in the new year and beyond.”

Units of Parkway Life REIT opened at a price of $2.40 each this morning. This translates to a historical price-to-book ratio of around 1.43 and a trailing yield of 5.1% per unit.

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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.