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
