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3 Things Investors Should Know About Parkway Life REIT’s Latest 2016 Results

Parkway Life REIT (SGX: C2PU) is one of the largest listed healthcare real estate investment trusts in Asia by asset size.

As of 31 December 2016, the REIT has ownership over three private hospital properties in Singapore (Mount Elizabeth Hospital, Gleneagles Hospital, and Parkway East Hospital) and 40 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia. Collectively, these 44 properties are worth S$1.7 billion.

The REIT recently reported its 2016 full year results. Let’s look at three useful pieces of information that investors may want to know from the announcement:

1. The overall results

The following table shows some important numbers from Parkway Life REIT’s income statement for the fourth quarters and whole of 2015 and 2016:

Parkway Life REIT 2016 income statement table
Source: Parkway Life REIT 2016 full year earnings release

In all, Parkway Life REIT delivered positive quarterly and full year results despite the obvious declines in its distributions.

Thing is, the REIT had enjoyed one-off divestment gains in the fourth quarter and whole of 2015; if we’re looking simply at the recurring portions of Parkway Life REIT’s distributions, the REIT would actually have posted low single-digit year-on-year growth rates.

2. Lease structure of Japanese properties

The chart below shows some of the important characteristics of Parkway Life REIT’s Japanese properties:

Parkway Life REIT 2016 Japanese properties lease structure
Source: Parkway Life REIT 2016 full year earnings presentation

What investors should know here is that most of Parkway Life REIT’s Japanese properties have only upside but little downside in terms of rental review.

Moreover, the lease structures are extremely long term in nature (an average of 13.21 years), thus providing a stable stream of long-term income for the REIT.

3. Outlook for 2017

As investors, we rely on many tools, including management’s forecasts, to help us gain insight on what to expect for the near to long term performance of our investments’ business.

With regard to Parkway Life REIT, this is what its manager said about its future outlook in the earnings release:

“The long-term prospects of the regional healthcare industry continue to be driven by rising demand for better quality private healthcare services given the fast-ageing populations. However, in the short to medium term, while Parkway Life REIT expects challenges in acquisition opportunities given the market volatility, we remain cautiously optimistic about its prospects.

Parkway Life REIT’s enlarged portfolio of 44 high-quality healthcare and healthcare-related assets places it in a good position to benefit from the resilient growth of the healthcare industry in the Asia Pacific region.

In addition, Parkway Life REIT is supported by favourable rental lease structures, where at least 94% of its Singapore and Japan portfolios have downside revenue protection and 64% of the total portfolio is pegged to CPI-linked revision formulae, ensuring steady future rental growth whilst protecting revenue stability amid uncertain market conditions.”

In short, Parkway Life REIT’s Manager thinks the REIT is in a favorable position to capture the long-term growth trend in the regional healthcare market, although short to medium term acquisition opportunities will remain challenging.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.