Comprehensive Analysis of Parkway Life REIT (PREIT)
Date: February 17, 2025
Broker: UOB Kay Hian
Overview of Parkway Life REIT (PREIT)
Parkway Life REIT (PREIT) stands as one of Asia’s largest listed healthcare real estate investment trusts (REITs), focusing on income-producing real estate and assets primarily related to healthcare. Its portfolio encompasses regions like Singapore, Japan, and France, underpinned by a solid defensive strategy and consistent growth trajectory.
Investment Recommendation: BUY
The report maintains a BUY recommendation for PREIT, with a revised target price of S\$4.85, reflecting a 25.3% upside from its current share price of S\$3.87. Despite some challenges, PREIT continues to appeal to risk-averse investors due to its proven defensive strength and long weighted average lease expiry (WALE) of 15.3 years.
Notable Highlights and Performance Metrics
Uninterrupted Dividend Per Unit (DPU) Growth
PREIT achieved its 17th consecutive year of uninterrupted DPU growth in 2024, reporting a DPU of 7.38 Singapore cents for 2H24. While this represents a slight decline of 1.3% year-on-year (yoy), the full-year DPU for 2024 stood at 14.92 Singapore cents, a 1.0% yoy increase. Adjusted for the equity fund raising (EFR) in November 2024, the DPU would have been higher at 15.11 Singapore cents (+2.3% yoy).
Key Financials
| Year |
Net Turnover (S\$m) |
EBITDA (S\$m) |
DPU (S\$ cents) |
P/E Ratio (x) |
DPU Yield (%) |
| 2023 |
147 |
122 |
14.8 |
22.7 |
3.8 |
| 2024 |
145 |
119 |
14.9 |
23.7 |
3.9 |
| 2025F |
158 |
134 |
14.8 |
22.5 |
3.8 |
| 2026F |
159 |
133 |
17.7 |
22.7 |
4.6 |
| 2027F |
162 |
136 |
18.1 |
22.2 |
4.7 |
Growth Catalysts and Strategic Moves
Entry into France
PREIT expanded its portfolio by acquiring 11 nursing homes in France for €111.2 million (S\$159.9 million) in December 2024. These properties, with 850 beds, are leased to DomusVi for 12 years and offer a net property income (NPI) yield of 6.5%. Their contribution to gross revenue and NPI for 4Q24 was S\$0.4 million, reflecting only 12 days of earnings.
Singapore Market Opportunities
- Mount Elizabeth Novena Hospital (MENH): PREIT holds the first right of refusal to acquire MENH, which features 13 operating theatres and 333 single-bed-only wards. The property is valued at S\$1,364 million.
- Gleneagles Hospital Asset Enhancement Initiative (AEI): PREIT is evaluating an AEI for Gleneagles Hospital, potentially commencing in 2026 after the completion of Project Renaissance at Mount Elizabeth Hospital (MEH).
Potential Divestments
PREIT is considering divesting its medical center at Jalan Ampang, Kuala Lumpur, valued at S\$5.9 million. The property has attracted keen interest and may be sold in 2025.
Resilience Amid Challenges
Managing Debt and Leverage
PREIT’s aggregate leverage improved to 34.8% as of December 2024, following an EFR that raised S\$180 million. Additionally, 87% of its interest rate exposure is hedged, and the REIT has hedged its JPY net income until 1Q29 to mitigate currency volatility.
Coping with Higher Interest Costs
Finance costs increased by 14.9% yoy in 2H24 due to funding for Project Renaissance and recent acquisitions. However, these costs have been capitalized, ensuring no impact on distributions.
Valuation and Recommendation
PREIT’s valuation is based on the Dividend Discount Model (DDM) with a cost of equity of 6.5% and terminal growth rate of 3.0%. The REIT provides a secure investment avenue, especially for risk-averse investors seeking exposure to the healthcare sector.
Recommendation: Maintain BUY at a target price of S\$4.85.
Key Share Price Catalysts
- Higher contributions from extended leases for Singapore hospitals.
- Yield-accretive acquisitions in Singapore.
