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9 Quick Things Investors Should Know About Parkway Life REIT’s Latest Earnings Update

In late April, Parkway Life REIT (SGX: C2PU) reported its 2018 first quarter earnings update. As a quick introduction, Parkway Life REIT owns healthcare assets across Asia. Its portfolio currently includes three private hospitals in Singapore, 46 healthcare-related assets in Japan, and strata-titled units/lots in Gleneagles Intan Medical Centre in Malaysia.

Here are nine key things to note about Parkway Life REIT’s latest results:

1. For the quarter, gross revenue grew 3.2% year-on-year to S$27.8 million while net property income (NPI) similarly increased by 3.3% to S$26.0 million.

2. Yet, the REIT’s distribution per unit (DPU) declined by 3.4% to 3.17 cents compared to a year ago. But, there was a one-off divestment gain in the first quarter of 2017; if the gain was excluded, Parkway Life REIT’s DPU would have increased by 3.6% year-on-year instead.

3. Based on Parkway Life REIT’s annualized DPU of 12.68 cents, and its closing unit price of S$2.75 as of 14 May 2018, the REIT has an annualised distribution yield of 4.6%.

4. As of 31 March 2018, the REIT’s gearing stood at 38.0%, which is still a safe distance from the regulatory ceiling of 45%.

5. The REIT’s occupancy rate stood at 99.97% as of 31 March 2018.

6. The weighted average lease to expiry for Parkway Life REIT (by gross revenue) was at 7.90 years.

7. Geographically, Singapore and Japan accounted for 59.5%, and 40.1%, respectively, of the REIT’s gross revenue in the reporting quarter.

8. Parkway Life REIT completed the acquisition of a nursing rehabilitation facility in Japan on February 2018, and also completed two asset enhancement initiatives during 2018’s first quarter.

9. In its earnings update, Parkway Life REIT had shared the following useful comments on its outlook:

“The long-term outlook of the industry continues to be driven by favourable patient demographics and demand for better quality healthcare and aged care services.

Parkway Life REIT’s enlarged portfolio of 50 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. Also, the entire portfolio is supported by favourable rental lease structures, where at least 95% of its Singapore and Japan portfolios have downside revenue protection and 61% 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 addition, Parkway Life REIT adopts prudent financial risk management to manage the exposure to interest rate risk and foreign currency risk. Interest rate risk is managed on an ongoing basis by largely hedging long-term committed borrowings using interest rate hedging financial instruments or issuance of fixed rate notes. This strengthens Parkway Life REIT’s resiliency against potential interest rate hikes. Foreign currency risk is managed by adopting a natural hedge strategy for the Japanese investments to maintain a stable net asset value and putting in place Japanese Yen forward contracts to shield against JPY currency volatility.”

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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. The Motley Fool Singapore has a recommendation on Parkway Life REIT.