Parkway Life REIT - Distribution per unit grew by 1.3% in 1Q25

DPU grew 1.3% year-on-year

Parkway Life REIT reported a distribution per unit (DPU) of 3.84 cents in 1Q 2025, a 1.3% increase compared to 1Q 2024. 

While revenue grew 7.3% year-on-year, an enlarged unit base following the equity fund raising in November 2024 led to a more modest growth in DPU. 

Parkway Life REIT’s net property income increased by 7.5% year-on-year in 1Q 2025, due to contribution from one nursing home acquired in Japan in August 2024 and eleven nursing homes acquired in France in December 2024. 

This was offset by depreciation of the Japanese Yen. In addition, the Singapore properties with step-up lease arrangements contributed to higher distributable income in 1Q 2025.

Divestment of Malaysia portfolio

Parkway Life REIT announced the divestment of the entire Malaysia portfolio at RM20.09 million (S$6.09 million). 

The divestment price is at 4.6% above the average of the two independent valuations of RM19.2 million as at 31 December 2024, and will translate to anestimated gain (before tax) of S$0.10 million. 

The purchaser of the Malaysia portfolio is Pantai Medical Centre Sdn. Bhd., a wholly owned subsidiary of IHH Healthcare Berhad. 

As IHH is a substantial shareholder of Parkway Life REIT, the divestment is a related party transaction. 

However, the aggregate value of the divestment is less than 3% of Parkway Life REIT's latest audited net tangible assets. 

Also, the Audit and Risk Committee of the manager of Parkway Life REIT confirmed it has undertaken due process to ensure that the terms of the divestment are generally in line with that which have been obtained had the assets been sold to a non-interested party.

Healthy gearing of 36.1%

Parkway Life REIT’s gearing rose slightly to 36.1% as at 31 March 2025 from 34.8% as at 31 December 2024, due to higher borrowing with the additional drawdown of loans for capex and working capital purposes, as well as appreciation of the Japanese Yen. 

Despite the increase in gearing, Parkway Life REIT has ample debt headroom of S$424.1 million before reaching 45% gearing. 

Mitigation of FX and interest rate risks

Parkway Life REIT’s principal FX risk is mitigated as its Japanese acquisitions are fully funded by loans in Japanese Yen (JPY), and Singapore dollar denominated loans which were overlaid with cross currency interest rate swap.  

At the same time, about 90% of its interest rate exposure is hedged as at 31 March 2025. 

Maintain Buy with target price of S$4.60

We continue to like Parkway Life REIT for Its exposure to the growing healthcare sector, with a track record of generating consistent DPU growth since its IPO in 2007. 

Based on its current share price, Parkway Life REIT offers a potential dividend yield of 3.6% in 2025E and 4.2% in 2026E.

Related links:

• Parkway Life REIT - Long-term defensive growth potential
• Parkway Life REIT share price history and share price target
• Parkway Life REIT history and dividend forecasts

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