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What Investors Should Know About Parkway Life REIT’s Latest Earnings and Valuation

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 2017, the REIT has ownership over three private hospital properties in Singapore, and holds stakes in 45 healthcare-related assets in Japan. It also has strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.

There are two things to know about the REIT right now: Its latest financial performance and valuation.

Financial performance

Here is a table showing important items from Parkway Life REIT’s financial performance for 2017:


Source: Parkway Life REIT 2017 earnings presentation

The year-on-year increase in the REIT’s net property income was due to lower property expenses (due to the absence of one-off marketing expenses in 2016), offset partially by a slight decline in gross revenue that was mainly driven by the depreciation of the Japanese yen against the Singapore dollar.

The RET’s DPU (distribution per unit) grew 10.2% to 13.35 cents due to higher net operating income and distributions from diverstment gains. Without the divestment gains, Parkway Life REIT’s DPU would have increased by 2.8% to 12.46 cents.

A high committed occupancy rate of 99.97% as of 31 December 2017 was maintained by the REIT, while its gearing stood at just 36.4%, which is a fair distance from the regulatory gearing ceiling of 45%.

In all, Parkway Life REIT ended 2017 with a stable business performance.

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows Parkway Life REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 42 REITs that are in Singapore’s stock market.


Source: Stock Facts on SGX.com

We can see that Parkway Life REIT’s valuation is significantly higher than the market’s.

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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.