CGS International
April 22, 2025
Parkway Life REIT: Maintaining Health and Stability in Healthcare Real Estate
Parkway Life REIT Overview
- Parkway Life REIT (PREIT) reported a 1Q25 DPU of 3.84 Singapore cents, aligning with 24.9% of FY25F forecast. [[1]]
- Revenue growth in 1Q25 was supported by new acquisitions made in 2024 and a step-up in Singapore’s master lease structure. [[1]]
- The “Add” rating is maintained with an unchanged DDM-based target price of S\$4.91. [[1]]
1Q25 Business Update
- PREIT’s revenue increased by 7.3% year-over-year (YoY) to S\$38.9 million, and Net Property Income (NPI) rose by 7.5% YoY to S\$36.8 million. [[1]]
- Growth was driven by contributions from France nursing homes, the addition of a Japan nursing home acquired in 2024, and improved Singapore lease arrangements. [[1]]
- These gains were partially offset by a weaker ¥ (Japanese Yen). [[1]]
- Distribution income for 1Q25 was S\$25 million, a 9.1% increase YoY, translating to a DPU of 3.84 Singapore cents, up 1.3% YoY. [[1]]
- The increase in DPU was moderated by an enlarged units base following an equity fundraising exercise to finance the acquisition of 11 properties in France. [[1]]
Income Profile and Rental Structure
- Singapore revenue and NPI accounted for 65.2% and 66.2% of total 1Q25 revenue and NPI, respectively, amounting to S\$25.4 million and S\$24.4 million. [[1]]
- Singapore revenue and NPI remained flat YoY due to the straight-lining of rental income under new master lease agreements that commenced on August 23, 2022. [[1]]
- Overseas contributions made up a higher 34.8% of total revenue, including revenue from Japan (S\$10.7 million, -1.6% YoY) and a full quarter’s contribution from the France portfolio (S\$2.8 million). [[2]]
- Japan’s operations were affected by the yen’s depreciation against the Singapore dollar. [[2]]
- PREIT recognized a realized foreign exchange gain of S\$2.2 million in 1Q25, mitigating the impact of the weaker yen. [[2]]
- ¥ and € net income hedges are in place until 1Q29F and 1Q30F, respectively. [[2]]
Balance Sheet and Gearing
- Gearing stood at 36.1% as of the end of 1Q25. [[2]]
- All-in interest cost marginally increased QoQ to 1.5% over the same period. [[2]]
- 90% of interest rate exposure is hedged into fixed rates. [[2]]
- Approximately 65.1% of PREIT’s assets under management remain exposed to Singapore as of end-1Q25. [[2]]
- Management aims to deliver a multi-pronged growth strategy while strengthening its core presence in Singapore. [[3]]
- In April 2025, PREIT announced the proposed sale of strata units and lots at MOB Specialist Clinics in Malaysia for Rm20.09 million, as part of its portfolio optimization strategy. [[3]]
Rating and Recommendation
- FY25-27F DPU estimates are unchanged, maintaining the DDM-based target price at S\$4.91 (cost of equity: 6.45%). [[3]]
- The “Add” rating is reiterated due to PREIT’s stability and defensive income structure with built-in rent escalation features. [[3]]
- Potential re-rating catalysts include accretive acquisitions. [[3]]
- Downside risks include deflationary periods and potential capital expenditure overruns or delays in the completion of asset enhancement initiatives at Mount Elizabeth Hospital in Singapore. [[3]]
Peer Comparison
SHARE PRICES AS AT 21 APR 2025
| Sector | Bloomberg Ticker | Rec. | Last Price (LC) as at 21 Apr 25 | Target Price (LC) (DDM-based) | Mkt Cap (US \$m) | Last reported asset leverage | Last stated NAV | Price / NAV | Dividend Yield (%) FY25F | Dividend Yield (%) FY26F | Dividend Yield (%) FY27F |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Hospitality | CLAS SP | Add | 0.85 | 1.13 | \$2,472 | 38.3% | 1.15 | 0.73 | 7.2% | 7.5% | 7.5% |
| Hospitality | CDREIT SP | Add | 0.77 | 1.07 | \$739 | 38.8% | 1.48 | 0.52 | 7.7% | 8.3% | 8.5% |
| Hospitality | FEHT SP | Add | 0.54 | 0.75 | \$836 | 30.8% | 0.92 | 0.59 | 7.5% | 7.3% | 7.3% |
| Hospitality | FHT SP | NR | 0.60 | NA | \$773 | 35.0% | 0.64 | 0.94 | 4.1% | 4.4% | 4.8% |
| Simple Average | 35.7% | 0.69 | 6.6% | 6.9% | 7.0% | ||||||
| Industrial | AAREIT SP | NR | 1.25 | NA | \$754 | 33.7% | 1.26 | 0.99 | 7.4% | 7.3% | 7.5% |
| Industrial | CLAR SP | Add | 2.62 | 3.10 | \$8,850 | 37.7% | 2.20 | 1.19 | 5.9% | 6.1% | 6.2% |
| Industrial | EREIT SP | Add | 0.21 | 0.36 | \$1,292 | 42.8% | 0.28 | 0.76 | 10.3% | 10.8% | 10.9% |
| Industrial | FLT SP | Add | 0.89 | 1.35 | \$2,556 | 36.2% | 1.13 | 0.78 | 7.6% | 7.8% | 7.6% |
| Industrial | KDCREIT SP | Add | 2.05 | 2.48 | \$3,549 | 30.2% | 1.53 | 1.34 | 4.8% | 5.0% | 5.2% |
| Industrial | MINT SP | Add | 2.02 | 2.82 | \$4,420 | 39.8% | 1.74 | 1.16 | 6.9% | 7.0% | 7.2% |
| Industrial | MLT SP | Add | 1.17 | 1.73 | \$4,550 | 40.3% | 1.34 | 0.87 | 6.8% | 6.5% | 6.5% |
| Industrial | SERT SP | Add | 1.43 | 1.92 | \$926 | 40.2% | 1.33 | 1.08 | 9.0% | 9.1% | 9.0% |
| Industrial | SSREIT SP | NR | 0.36 | NA | \$291 | 37.4% | 0.50 | 0.71 | 0.0% | 0.0% | 0.0% |
| Simple Average | 37.6% | 0.99 | 6.5% | 6.6% | 6.7% | ||||||
| Office | KREIT SP | Add | 0.83 | 1.09 | \$2,451 | 41.2% | 1.24 | 0.67 | 7.0% | 7.1% | 7.1% |
| Office | OUEREIT SP | Hold | 0.28 | 0.32 | \$1,182 | 39.3% | 0.59 | 0.47 | 6.9% | 7.3% | 7.6% |
| Office | SUN SP | Hold | 1.13 | 1.33 | \$2,545 | 42.3% | 2.05 | 0.55 | 5.7% | 6.1% | 6.4% |
| Simple Average | 40.9% | 0.56 | 6.5% | 6.8% | 7.0% | ||||||
| Retail | CICT SP | Add | 2.10 | 2.45 | \$11,790 | 38.5% | 2.09 | 1.00 | 5.3% | 5.6% | 5.9% |
| Retail | FCT SP | Add | 2.21 | 2.68 | \$3,263 | 39.3% | 2.23 | 0.99 | 5.5% | 5.6% | 5.7% |
| Retail | LREIT SP | Add | 0.51 | 0.69 | \$948 | 40.8% | 0.74 | 0.68 | 7.8% | 7.9% | 7.9% |
| Retail | MPACT SP | Add | 1.20 | 1.53 | \$4,852 | 38.2% | 1.73 | 0.69 | 6.8% | 6.9% | 7.1% |
| Retail | PGNREIT SP | Hold | 0.97 | 0.98 | \$2,114 | 35.3% | 0.92 | 1.06 | 5.2% | 5.4% | 5.6% |
| Retail | SGREIT SP | Add | 0.49 | 0.60 | \$864 | 36.2% | 0.69 | 0.71 | 7.4% | 7.5% | 7.6% |
| Simple Average | 38.1% | 0.86 | 6.3% | 6.5% | 6.6% | ||||||
| Overseas-centric | CLCT SP | NR | 0.67 | NA | \$916 | 41.9% | 1.09 | 0.61 | 8.4% | 8.5% | 8.6% |
| Overseas-centric | ELITE SP | Add | 0.28 | 0.35 | \$221 | 45.5% | 0.39 | 0.72 | 10.5% | 10.5% | 10.5% |
| Overseas-centric | MUST SP | Add | 0.06 | 0.13 | \$105 | 60.8% | 0.23 | 0.26 | 0.0% | 46.7% | 54.2% |
| Overseas-centric | SASSR SP | Add | 0.62 | 0.85 | \$597 | 24.8% | 0.83 | 0.75 | 9.9% | 10.3% | 10.6% |
| Simple Average | 43.3% | 0.58 | 7.2% | 19.0% | 21.0% | ||||||
| Healthcare | PREIT SP | Add | 4.20 | 4.91 | \$2,103 | 36.1% | 2.42 | 1.74 | 3.7% | 4.0% | 4.2% |
ESG Analysis
- PREIT received a C- overall ESG ranking by LSEG in 2023, with Environmental (D), Social (C-), and Governance (C+) scores. [[3]]
- The company scored A+ on ESG controversies. [[3]]
- Collaborations with IHH Group to reduce greenhouse gas (GHG) emissions from its Singapore portfolio and partnerships with Japan asset managers on energy and emissions data collection. [[3]]
- A Sustainability Steering Committee was established in 2017, supported by a Sustainability Task Force. [[3]]
- Material sustainability factors include energy & GHG emissions, climate change resilience, employee engagement and wellbeing, diversity and inclusion, training and development, compliance with laws and regulations, ethics and anti-corruption, sustainable investment, economic contribution, and risk management. [[3]]
Areas for Improvement
- Resource use and environmental innovation were rated D- by LSEG in 2023. [[3]]
- Community (D-) and CSR strategies (C) received low ratings under the Social pillar. [[3]]
Potential Upsides
- The renewal capex agreement for Singapore hospitals is expected to future-proof the properties and improve ESG rankings upon completion. [[3]]
ESG Highlights
- PREIT was ranked 84th out of 104 companies in Singapore and 24th among real estate companies/REITs in Singapore by LSEG. [[3]]
- Carbon emissions and intensity increased by 3.3% YoY in 2024 for Singapore properties due to increased energy consumption at Gleneagles Hospital and Mount Elizabeth Hospital. [[3]]
- The 2025 target is to cap carbon growth and achieve Net Zero by 2050. [[3]]
- Completed replacement of two chillers in Dec 2024, with the remaining two to be replaced in 2025, expected to result in a 16% savings. [[3]]
- Replacement of the chiller plant system at Parkway East Hospital is expected to reduce energy usage by 20%. [[3]]
- Upgraded one chiller and replaced water fittings at Mount Elizabeth Hospital, expected to improve energy consumption by 5%. [[3]]
- Average training hours per employee declined to 25.1 hours in 2024. [[3]]
Shareholder, Management, and Workforce Rankings
- Shareholders (A), management (B), and workforce (B) have been ranked as the top three best-performing categories by LSEG. [[3]]
Financial Analysis
P/BV vs Asset Leverage
