Parkway Life REIT - Long-term defensive growth potential

One of the largest listed healthcare REIT in Asia

Parkway Life REIT is a leading healthcare-focused REIT in Asia, with assets across Singapore, Japan, France and Malaysia. 

Its defensive long term lease structure with downside protection provides for a resilient earnings stream, with the REIT well-positioned to capitalise on the growing healthcare sector. 

It has an enviable track record of generating uninterrupted recurring DPU growth since its IPO in 2007. From 2007 to 2024, its DPU has grown by about 136% from an annualised DPU of 6.32 cents to 14.92 cents in 2024.

Historical DPU track record since IPO in 2007

Significant rental growth in FY26

Singapore represents the key geographic market for PLife REIT at 62.5% of asset value. 

Its master lease was recently renewed for a 20.4 year lease term ending December 2042, with an option to renew for a further term of 10 years. With built-in annual rent growth, the income from the Singapore Hospitals is secured with 100% committed occupancy over the long term. 

Importantly, we highlight that in FY26, aggregate rent payable is expected to increase by 24.4% year-on-year from S$79.7 million to S$99.2 million, following the completion of the AEI at Mount Elizabeth Hospital as part of Project Renaissance, driving substantial revenue growth for the REIT.

Entry into France to provide greater diversification and growth

On 22 October 2024, PLife REIT announced that it is acquiring a portfolio of 11 nursing home properties in France from DomusVI Group, the third largest aged care operator in Europe, for €111.2 mn (S$159.9 mn) in a sale & leaseback arrangement and (2) expanded its investment mandate to establish a third key market in Europe and the UK. 

Even though the acquisition was fully financed by an equity fund raising exercise, the first in PLife REIT’s history, the acquisition was ~2% accretive to DPU and ~4% accretive to NAV per unit. 

Initiate coverage with Buy

We derived a target price of S$4.60 per unit based on a three-stage dividend discount model, on a cost of equity of 8% and terminal growth rate of 2%. 

This would imply a potential 11% upside to the current share price of S$4.15, with a FY25E distribution yield of 3.7% gives a total return potential of 14.5%. 

Key risks include sustained elevated interest rates, weakening in Japanese Yen against Singapore dollar, amongst others. 

If you are interested to learn more about the outlook of Singapore REITs amidst the current market volatility, join us for our upcoming free webinar on 16 April, where we will discuss if the share prices of Singapore REITs will recover with falling bond yields. Register for free here.

Related links:

• Parkway Life REIT share price history and share price target
• Parkway Life REIT history and dividend forecasts

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