Introduction

In its comprehensive January 8, 2025 report, Maybank Research provides an in-depth analysis of Parkway Life REIT and several other key REITs across various sectors. This article dives into the critical insights, growth prospects, and recommendations for each company covered in the report. The analysis focuses on financial metrics, growth strategies, risks, and opportunities, aiming to provide a holistic understanding for investors.

Parkway Life REIT: Asia’s Largest Healthcare REIT

Parkway Life REIT (PREIT) stands out as Asia’s largest healthcare REIT, offering a defensive and stable profile with uninterrupted dividend growth since its IPO in 2007. The report recommends a BUY rating and sets a target price of SGD4.10, reflecting a 12% upside potential.

Key Attributes

• Strong Track Record: DPU has grown by 134% since its IPO, with a visible CAGR of 7.2% forecasted for FY2024–2026.
• Strategic Expansion: PREIT has diversified into France with the acquisition of 11 nursing homes, expanding its footprint beyond Singapore and Japan.
• Favorable Cost of Capital: With a leverage ratio of 37.5% and a low debt cost of 1.4%, PREIT is well-positioned for further growth.
• Sector Tailwinds: Supported by healthcare sector trends, demographics, and government policies, PREIT benefits from a defensive and growth-oriented market.

Investment Highlights

• Master Lease Renewal: PREIT’s Singapore hospitals’ master lease renewal ensures a 39.6% rental growth by FY2026, supported by CPI-linked rent escalation clauses.
• France Foray: Partnering with DomusVi Group, the second-largest nursing home operator in France, PREIT ensures stability and scalability in the European market.
• Right of First Refusal (ROFR): PREIT holds a 10-year ROFR for Mount Elizabeth Novena Hospital in Singapore, a potential accretive acquisition.

Key Risks

• Execution challenges in France.
• Currency volatility, particularly with JPY and EUR.
• Shifting healthcare industry dynamics and regulatory changes.

Financial Metrics

In FY2026, PREIT is expected to deliver a DPU of SGD18.22c, reflecting a yield of 4.8%. The report estimates a NAV of SGD2.58 and gearing of 35.9% by FY2026. PREIT’s robust financial model, supported by asset enhancements and strategic acquisitions, consolidates its position as a top-tier healthcare REIT.

CapitaLand Integrated Commercial Trust (CICT)

CICT, a leading commercial REIT, has been assigned a BUY rating with a target price of SGD2.34. The REIT is expected to deliver a dividend yield of 5.6%, with a 2-year DPU CAGR of 7.2%.

Performance Drivers

• Strategic asset enhancements and acquisitions drive growth.
• Rental income continues to improve post-COVID recovery.

Valuation

CICT trades at a P/BV of 0.93x, offering an attractive yield spread to investors. Its diversified portfolio and strong tenant base make it a compelling investment option.

Mapletree Pan Asia Commercial Trust (MPACT)

MPACT has been rated as HOLD with a target price of SGD1.29. The REIT offers a dividend yield of 6.6% and is expected to achieve a modest 2-year DPU growth of 4.4%.

Challenges

• Higher interest costs weigh on profitability.
• Limited near-term catalysts for growth.

Valuation

MPACT trades at a P/BV of 0.69x, reflecting a cautious outlook amid macroeconomic uncertainties.

Frasers Centrepoint Trust (FCT)

FCT is recommended as a BUY with a target price of SGD2.50. The REIT offers a dividend yield of 5.5% and a 2-year DPU CAGR of 7.2%.

Growth Catalysts

• Resilient suburban retail portfolio.
• Steady rental reversions support income growth.

Suntec Real Estate Investment Trust (SUN)

SUN has been rated as HOLD with a target price of SGD1.25. The REIT offers a dividend yield of 5.8%, but growth prospects remain subdued.

Key Concerns

• High gearing limits acquisition potential.
• Rising interest costs impact margins.

Keppel REIT (KREIT)

KREIT receives a BUY recommendation with a target price of SGD1.05. The REIT delivers a dividend yield of 6.6%, supported by high-quality office assets in prime locations.

Strengths

• Robust tenant base ensures stable income.
• Undervalued compared to peers.

ESR-LOGOS REIT (EREIT)

EREIT is rated as BUY with a target price of SGD0.32. The REIT offers a high dividend yield of 9.0%, supported by a diversified industrial portfolio.

Growth Opportunities

• Strategic acquisitions in growth markets.
• Focus on green certifications enhances appeal.

First REIT

First REIT is recommended as a BUY with a target price of SGD0.28. The REIT offers an attractive yield of 9.1% and a 2-year DPU CAGR of 9.4%.

Key Highlights

• Resilient healthcare-focused portfolio.
• Strong growth potential in emerging markets.

Conclusion

Maybank Research’s comprehensive January 2025 report highlights strong growth opportunities in the REIT sector, led by Parkway Life REIT and other key players. Strategic acquisitions, resilient portfolios, and favorable market conditions underpin the recommendations. Investors should consider the unique strengths and risks of each REIT to make informed decisions.