Parkway Life REIT: A Stable Investment with Promising Prospects
Parkway Life REIT (PREIT) reported strong performance and maintained its position as a stable, defensive investment option. The REIT’s 2H24 distribution per unit (DPU) stood at 7.38 Singapore cents, bringing the full-year FY24 DPU to 14.92 cents, which was largely in line with forecasts. Despite a slight revenue decline of 0.3% year-on-year in 2H24 to S\$72.8 million, the REIT demonstrated resilience through its diversified portfolio and robust hedging strategies.
PREIT’s Singapore operations accounted for 69.7% of 2H24 revenue and 71.7% of net property income (NPI), contributing significantly to its stable income structure. The new master lease agreements initiated in 2022 further bolstered this stability. France and Japan properties provided additional contributions, although the impact of a weaker yen caused slight revenue declines in the Japan portfolio. Robust hedging mechanisms, including yen net income hedges until 1Q29F, mitigated forex risks.
Strategically, PREIT’s gearing ratio stood at a healthy 34.8%, and 87% of its interest rate exposure was hedged into fixed rates. Its expansion into Europe now accounts for 34.9% of its assets under management, with the majority still centered in Singapore. The REIT’s management reiterated its commitment to a multi-pronged growth strategy, emphasizing accretive acquisitions and defensive income stability. The report maintained an “Add” rating for PREIT, with a DDM-based target price of S\$4.91, representing a 24.6% potential upside from its current price of S\$3.94.
CapitaLand Ascott Trust: Growth in Hospitality
CapitaLand Ascott Trust (CLAS) is positioned as a key player in the hospitality sector. Its share price stands at S\$0.87 with a target price of S\$1.18, offering a potential upside of 35.6%. CLAS is recommended as an “Add” due to its attractive dividend yields of 7.1%, 7.3%, and 7.9% for FY24F, FY25F, and FY26F, respectively. The REIT benefits from its diversified portfolio and the recovery in global tourism, which has boosted its revenue streams.
CDL Hospitality Trust: Steady Outlook
CDL Hospitality Trust (CDREIT) has been rated an “Add” with a share price of S\$0.83 and a target price of S\$1.07. Offering dividend yields of 6.5%, 7.1%, and 7.7% over the next three fiscal years, CDREIT holds a promising outlook. Its portfolio spans across key global markets, with a strategic focus on high-demand hospitality assets.
Far East Hospitality Trust: Consistent Performance
Far East Hospitality Trust (FEHT) has also been rated as an “Add,” with a share price of S\$0.60 and a target price of S\$0.78. Its dividend yields are projected at 7.0% for FY24F, FY25F, and FY26F. The REIT continues to benefit from its stronghold in Singapore’s hospitality market, supported by gradual recovery in the tourism sector.
Frasers Logistics & Commercial Trust: Industrial Sector Strength
Frasers Logistics & Commercial Trust (FLT) is a standout in the industrial REIT category with a share price of S\$0.88 and a target price of S\$1.35. Rated as an “Add,” the REIT offers robust dividend yields of 7.7%, 7.6%, and 7.8% over the next three years. Its diversified portfolio across logistics and commercial assets ensures steady income generation.
Keppel DC REIT: Data Center Growth
Keppel DC REIT is another industrial REIT rated as an “Add,” with a share price of S\$2.18 and a target price of S\$2.48. It offers dividend yields of 4.3%, 4.6%, and 4.7% over the next three fiscal years. The REIT is well-positioned to capitalize on the growing demand for data centers, driven by digital transformation trends.
CapitaLand Integrated Commercial Trust: Retail Recovery
CapitaLand Integrated Commercial Trust (CICT) has been rated as an “Add,” with a share price of S\$1.97 and a target price of S\$2.45. As a major retail REIT, it benefits from improving retail footfall in Singapore. Its dividend yields are projected at 5.5%, 5.6%, and 6.0% for FY24F, FY25F, and FY26F, respectively.
Parkway Life REIT: ESG Initiatives
PREIT’s ESG score, rated C- by LSEG, reflects ongoing efforts to improve its environmental footprint. Key initiatives include the installation of energy-efficient systems in its hospitals and a renewal capex agreement to future-proof its properties. These efforts are expected to improve its ESG rankings in the future.
Summary and Recommendations
The report by CGS International highlights strong performance and potential growth across various REITs. Parkway Life REIT stands out as a stable investment with defensive income features and promising growth prospects. Other REITs such as CLAS, CDREIT, and FLT also demonstrate resilience and attractive dividend yields, making them worthwhile considerations for investors seeking diversified exposure in the REIT sector.
