ParkwayLife REIT reports higher distribution: What you need to know about the healthcare REIT’s latest results

What happened?

ParkwayLife REIT (PLife REIT) reported a distribution per unit (DPU) of 7.29 cents for the first half of 2023, up 3.3% from the previous year.

If you have not heard of PLife REIT, it is one of the largest listed healthcare REITs in Asia with a portfolio of S$2.20 billion as of 30 June 2023. 

This would include renowned hospitals in Singapore such as Mount Elizabeth Hospital, Gleneagles Hospital, and Parkway East Hospital. 

PLife REIT has delivered uninterrupted DPU growth since its IPO in 2007, and its performance remained strong in the first half of 2023. 

In this article, I will be sharing my takeaways from PLife REIT’s results for the first half of 2023.

What you need to know about ParkwayLife REIT’s (SGX: C2PU) latest results

#1 -  Positive growth for PLife REIT 

PLife REIT recorded an increase of 23.6% for its gross revenue and 3.3% for its DPU in 1H 2023 as compared to the previous year.

Net property income also saw an increase of 25.1% from the previous year. 

These increases were mostly due to new master lease agreements signed with IHH Healthcare for the three hospitals in Singapore and the acquisitions of nursing homes in 2022.

#2 - PLife REIT’s debt profile remains healthy

As of 30 June 2023, PLife REIT’s all-in debt cost was 1.19%.

This is significantly lower than other S-REITs in the market as much of PLife REIT’s loans are denominated in Japanese Yen which have considerably lower interest rates.

Gearing was also healthy at 35.3%, giving PLife REIT ample headroom to refinance its debt and pursue future acquisitions.

In terms of debt maturity, PLife REIT does not have any long-term debt refinancing needs till 2024 when 20% of its debt (or approximately $164.5 million) is up for refinancing.

#3 - Outlook remains positive for PLife REIT

The long term outlook for the PLife REIT remains positive with the structural growth in the healthcare sector.

As part of ‘Project Renaissance’, PLife REIT and IHH Healthcare kickstarted the renewal works of Mount Elizabeth Hospital on 3rd January 2023.

This is slated to last around 3 years and is poised to positively impact both DPU and NAV in the future.

While PLife REIT is expected to pay $150 million across 3 years for the renewal works, it has not adversely affected PLife REIT yet as evidenced by its 1H results. Nevertheless, investors would want to keep this in mind for future earnings results.

In addition to ‘Project Renaissance’, the new master lease agreement should also provide PLife REIT with sustained growth in the long term due to its rental formula.

Last but not least, PLife REIT is also targeting to enter a 3rd market while building upon its established networks in both Singapore and Japan.

What would Beansprout do?

With its ability to deliver consistent growth in its distributions, it is not a surprise that PLife REIT is well-liked by investors looking for a REIT that has a strong track record over the medium term.

As such, the REIT’s valuation is also much richer compared to most other REITs. 

As of 26th July 2023, PLife REIT’s market price was $3.80, representing a premium of 64% on its net asset value.

PLife REIT’s forward dividend yield of 3.8% is significantly lower than First REIT, the other healthcare REIT in the market which offers a dividend yield of 9.4%.

If you are looking for a REIT that offers a higher dividend yield, check out our REIT ideas tool.