CGS International
August 6, 2025

Parkway Life REIT Delivers Robust 1H25 Results: Dividend Growth, Strategic Expansion, and Stable Outlook for Investors

Introduction: Parkway Life REIT Maintains Momentum in 1H25

Parkway Life REIT (PREIT), one of Singapore’s leading healthcare REITs, reported sturdy first-half 2025 results, reinforcing its reputation for stable distributions and resilient operating performance. The REIT continues to enhance its portfolio through acquisitions and asset enhancements, positioning itself as a defensive play for income-focused investors. CGS International reiterates its “Add” rating, raising the target price to S\$4.93, reflecting confidence in PREIT’s growth trajectory and income stability.

Key Highlights from 1H25 Financial Results

• 1H25 Distribution Per Unit (DPU) reached 7.65 Singapore cents, up 1.5% year-on-year, representing 49.6% of the full-year forecast and in line with expectations.
• Revenue and Net Property Income (NPI) rose by 8.1% and 8% year-on-year, respectively, to S\$78.3 million and S\$73.8 million, underpinned by recent acquisitions in France and Japan and an upward revision in Singapore leases.
• Distributable income increased 9.5% year-on-year to S\$49.9 million, reflecting contributions from new French properties and a successful equity fundraising exercise.

Operational Performance and Strategic Initiatives

Singapore Remains Core, France and Japan Fuel Growth

• Singapore assets contributed S\$50.8 million in revenue and S\$48.7 million in NPI, accounting for nearly two-thirds of group totals. Despite a 3% step-up in lease arrangements, revenue and NPI were flat due to straight-lining of rental income under renewed master leases.
• Overseas assets contributed 35.2% of total revenue, with Japan delivering S\$21.6 million and France S\$5.8 million.
• PREIT implemented long-term foreign exchange hedges for both Japanese Yen (¥) and Euro (€) incomes until 1Q29 and 1Q30, respectively, reducing currency risk. This generated S\$4.35 million in forex gains in 1H25.
• PREIT secured tax exemption approvals from the Inland Revenue Authority of Singapore for foreign-sourced dividends and interest from 7 out of its 11 French properties, estimating S\$1.26 million in full-year tax savings.

Strong Balance Sheet and Capital Management

• Gearing remained healthy at 35.4% as of end-1H25.
• All-in interest cost was stable at 1.5% in 2Q25, with 97% of interest rate exposure hedged at fixed rates.

Strategic Focus Areas

• PREIT aims to unlock value from optimized or non-core assets, particularly in Japan, and channel capital into strategic acquisitions within its operational footprint.
• Key strategies include expanding in France, maintaining Singapore as the core market, and forging partnerships for collaborative growth.

Upgraded Forecasts and Valuation

CGS International raised FY25-27 DPU forecasts by 1.15-2.66% to reflect tax savings from the French portfolio. The DDM-based target price is set at S\$4.93, based on a 5.83% cost of equity.
Re-rating Catalysts:

• Accretive acquisitions

Key Risks:

• Lower inflation, which could dampen inflation-indexed rental growth
• Potential capex overruns or delays at the Mount Elizabeth Hospital asset enhancement initiative

Comprehensive Financial Summary (S\$ millions)

Peer Comparison: SREITs Across Sectors

Hospitality REITs:

Industrial REITs:

Office REITs:

Retail REITs:

Overseas-Centric REITs:

Healthcare REITs:

ESG Performance: Sustainability Initiatives and Future Targets

PREIT scored a C- overall in the 2023 LSEG ESG rankings, with highlights and areas for improvement:

• Environmental: Resource use and environmental innovation scored D- but efforts are underway with capex agreements to future-proof hospitals and improve rankings.
• Social: Rated low for community engagement (D-) but maintains a C in CSR strategies.
• Governance: Scored C, with an A+ for ESG controversy management.
• PREIT aims to cap carbon growth by 2025 and attain net zero by 2050.
• Chiller replacements at Singapore hospitals are expected to cut energy consumption by up to 20% at Parkway East Hospital and 16% at Gleneagles Hospital.
• Average employee training hours fell to 25.1 in 2024.

Detailed Financials: Key Ratios and Balance Sheet Metrics

• Net property income margin remains robust at 94.5% in FY25F, increasing slightly through FY27F.
• DPS growth expected to be 4.5% in FY25F, accelerating to 11% in FY26F.
• Gross interest cover remains strong at 10.29x in FY25F.
• Effective tax rate continues to fall, projected at 5.7% in FY25F and 5.52% in FY27F.
• Occupancy remains at 100% across all forecast years.
• Assets under management projected to reach S\$2,629 million by FY27F.

Shareholder Structure and Market Performance

• Major shareholders include Parkway Pantai Limited (35.6%), Cohen & Steers (7.0%), and Bank of New York Mellon Corp (4.7%).
• Market cap stands at S\$2.68 billion (US\$2.09 billion), with average daily turnover of S\$3.88 million.
• Free float is 64.2% with 652.4 million shares outstanding.
• In the past 12 months, the share price has risen 16.1% in absolute terms but underperformed the SIMSCI index by 29.7%.

Conclusion: Parkway Life REIT – A Defensive, Stable Choice for Income Investors

Parkway Life REIT continues to deliver resilient results, supported by a stable income structure, built-in rent escalations, and prudent capital management. The REIT’s focus on strategic expansion, ESG enhancements, and robust balance sheet reinforces its appeal as a core portfolio holding for investors seeking income stability and defensive growth in the healthcare real estate sector.
CGS International maintains an “Add” rating with a higher target price of S$4.93, anticipating further upside from ongoing acquisitions, tax efficiencies, and asset enhancement initiatives. Investors should monitor potential risks around inflation trends and project execution, but the outlook remains positive for this leading healthcare REIT.