On 22 April 2025, Parkway Life REIT (“PLife”) announced their first quarter business update for FY2025. The France acquisition seems to have contributed positively to the portfolio, as DPU saw an increase during the quarter. They have also announced the divestment of the strata units and lots in Malaysia, which comprise of a small percentage of PLife portfolio. With this disposal, PLife will be able to achieve full overall portfolio occupancy. These changes currently look favorable for PLife, lending weight for the REIT to continue to trade at a significant premium from book value. Investors can continue to monitor if there are any significant changes to its financial position over the next few quarters.
Disclaimer: Not financial advice. All data and information provided on this site is for informational purposes only.
Website: General Announcement::Divestment Of Strata Units And Lots In Malaysia
Photo source: https://fifthperson.com/2021-parkway-life-reit-agm/
Financial Highlights
Distribution Per Unit (“DPU”)
| Metrics | Current | Previous |
|---|---|---|
| Distribution Per Unit | +6.1% | -2.1% |
| Rating | Favorable | Favorable |
With effect from May 2025, I will be using the quarter-on-quarter DPU changes as references for PLife. This is due to REITs are usually not as affected by seasonal changes, and PLife have been providing quarterly updates to DPU although distribution is semi-annually.
For PLife, DPU disclosed are as follows:
- First Quarter of FY2025: SGD0.0384 per unit
- Fourth Quarter of FY2024: SGD0.0362 per unit
DPU for the first quarter of FY2025 have increased by 6.1% to SGD0.0384 per unit from SGD0.0362 per unit in the fourth quarter of FY2024. The increase was mainly due to an increase in gross revenue and net property income, 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 partially offset by depreciation of the Japanese Yen and increase in finance costs. This metric has shifted towards Favorable.
Occupancy
| Metrics | Current | Previous |
|---|---|---|
| Occupancy | 100.0% | 99.7% |
| Rating | Favorable | Favorable |
On 21 April 2025, PLife have announced the divestment of the strata units and lots in Malaysia. This was the only portfolio that does not have 100% committed occupancy. With this disposal, the remaining portfolios which consists of Singapore, Japan and France will have an overall occupancy rate as of 31 March 2025 of 100.0%. This metric remains Favorable.
Gearing ratio
| Metrics | Current | Previous |
|---|---|---|
| Gearing Ratio | 36.1% | 34.8% |
| Rating | Favorable | Favorable |
Gearing ratio as of 31 March 2025 has increased to 36.1%. The increase was due to additional drawdown of loans for capital expenditure and working capital purposes, accompanied by the appreciation of Japanese Yen. This metric remains Favorable as there is still sufficient buffer.
Interest coverage
| Metrics | Current | Previous |
|---|---|---|
| Interest Coverage | 9.3x | 9.8x |
| Rating | Favorable | Favorable |
The interest coverage as of 31 March 2025 has decreased to 9.3 times. This metric remains Favorable and is attributable to their reported low cost of debt of 1.50% as their loans and borrowings are mainly Japanese Yen denominated.
The Bank of Japan on 1 May 2025 have kept interest rates steady at 0.50% since the increase on 24 January 2025, the highest in 17 years. Bank of Japan have also sharply cut its growth forecasts, suggesting uncertainty surrounding US tariffs and the hit to exports could keep policy in a holding pattern for some time.
Website: BOJ keeps rates steady, cuts growth forecasts on US tariffs hit
Website: Bank of Japan raises interest rates to highest in 17 years, yen jumps
Debt maturity profile
| Metrics | Current | Previous |
|---|---|---|
| Debt Maturity Profile | 3.3 years | 3.4 years |
| Rating | Favorable | Favorable |
The weighted average term to maturity of their debt as of 31 March 2025 has shortened slightly to 3.3 years. This metric remains Favorable as there is sufficient time for the REIT to refinance their debts as they fall due. Do note that 26% of their debt due to mature by the end of FY2026.
Price to Book Ratio
| Metrics | Current | Previous |
|---|---|---|
| Price to Book Ratio | 1.75 | 1.61 |
| Rating | Unfavorable | Unfavorable |
The Price to Book (“P/B”) ratio has become more expensive at 1.75. This is computed using the closing share price of SGD4.23 on 30 April 2025 and the net asset value per share of SGD2.42 as of 31 March 2025. The P/B ratio is Unfavorable.
It was worth noting however that the share price continued to rise despite being grossly overvalued. We will cover more in the “Key Things to Note” section.
As of 30 April 2025, the Market Capitalization is approximately SGD2,760 million.
Website: Yahoo Finance: Parkway Life Real Estate Investment Trust (C2PU.SI)
Dividend
| Year | Yield | Total |
|---|---|---|
| 2025 | 0.56% | SGD 0.024 |
| 2024 | 4.73% | SGD 0.200 |
| 2023 | 3.45% | SGD 0.146 |
| 2022 | 2.51% | SGD 0.106 |
| 2021 | 3.33% | SGD 0.141 |
| 2020 | 3.21% | SGD 0.136 |
Do note that the dividend paid out in the calendar year 2024 is higher due to an advance distribution was provided with the equity fund raising in 2024. Excluding the advance distribution, dividend in the calendar year 2024 will amount to SGD0.150 per unit. Unchanged from the previous article, this is a more conservative estimate to be used when projecting for the calendar year 2025.
With the closing share price of SGD4.23 on 30 April 2025, this translates to a dividend yield of 3.54%. For my benchmark, a reasonable yield would be around 5.25%. PLife yield sounds similar to growth equity stocks from other industries. The dividend yield is Unfavorable.
Website: Reasonable Dividend Yield 2025Q2 – 5.25%
Nonetheless, there is an interesting rationale for the dividend yield to be compressed and will be covered more in the “Key Things to Note” section.
Possible Expansion Targets
Third Pillar
There are currently 2 main pillars supporting PLife REIT. They are:
- The Hospitals in Singapore
- The Nursing Homes in Japan
Although PLife has recently ventured into the France nursing home market, PLife continues to mention they will be looking to venture into a new market and develop a new stream of revenue. Based on the announcement of 22 April 2025, management is still building a 3rd Key Market which can contribute enhanced growth for PLife in the mid to long term.
While the timing of this is uncertain, in my opinion it is certainly welcoming. This will allow for them to diversify their revenue and not rely on a single tenant for a large proportion of their revenue.
Based on their financial results, they are in a good position to do so. PLife is still trading at a high P/B ratio, and it will not be difficult for them to find a yield accretive target. It was worth noting as well that it will work in management’s favor to issue rights to capitalize on the high P/B ratio should they choose to continue to do so.
One thing they can consider is to expand into the senior living market in China. Granted however that there may be risks venturing into a new geographical location especially with the property market crisis. There is a need to determine the risks and rewards of the opportunities there.
Website: The Opportunities Available In Senior Living Market
Key Things to Note
Expensive getting more expensive
There is no denying that PLife is a relatively more expensive REIT compared to others that are available in the market. A dividend yield of 3.54% and P/B ratio of 1.75 exposes investors to higher risks. Given the straightforward business of REITs, their fair value usually should trade around their net asset value.
The key thing to note however, unlike most other REITs, PLife have income visibility. With their 20 years lease, this contributes a substantial portion of their income and serves as a bulwark for PLife as they explore new initiatives. Not to mention that this lease agreement also takes into consideration the Consumer Price Index (“CPI”) and is designed to increase overall rent payable based on the CPI. This is an effective hedge against inflation, which has been breaking historic highs recently.
Based on its dividend records, we can also see that they have steadily increase dividend payout over the years. Its stability and transparency are the reason for its high premium.
Nonetheless, it is still expensive, and something that investors should take note off and decide if they are comfortable with it before investing. If the market decides to crash, PLife’s can easily lose a significant portion of its market value.
Tenant concentration
Parkway Hospitals Singapore Pte. Ltd. is their top tenant contributing 59.2% of gross revenue. This indicates a heavy concentration of revenue and puts the REIT at the mercy of their customer.
While they have renewed the lease for 20 years, they are still dependent on the financial position of their customers. Cashflows have been tightening for all businesses and rental expense is one of the significant overheads that tenants will wish to cut down on. This might adversely affect the DPU of the REIT moving forward.
It is worth nothing however that the top tenant is a wholly owned subsidiary of Parkway Pantai Limited, who is a wholly owned subsidiary of Kuala Lumpur-based IHH Healthcare, Asia’s largest private healthcare group. IHH Healthcare is also in a good financial position, based on their latest financial highlights.
Website: IHH Healthcare Financial Highlights
The largest shareholders of IHH Healthcare are Mitsui of Japan (one of the largest sogo shosha in Japan) and then followed by the Malaysian government’s sovereign wealth fund Khazanah Nasional. This leads me to not expect the tenants to run into cash flow problems in the short term.
Summary
| Metrics | Financials | Rating |
|---|---|---|
| Distribution Per Unit | +6.1% | Favorable |
| Occupancy | 100.0% | Favorable |
| Gearing Ratio | 36.1% | Favorable |
| Interest Coverage | 9.3x | Favorable |
| Debt Maturity Profile | 3.3 years | Favorable |
| Price to Book Ratio | 1.75 | Unfavorable |
| Overall | Favorable |
The overall metric has shifted back to Favorable. With the acquisition of the France portfolio, it seems that the portfolio has strengthened reasonably. Investors can continue to monitor for future updates and determine if the new additions are stable.
Background
PLife is one of Asia’s largest listed healthcare Real Estate Investment Trusts (“REIT”). It invests in income-producing real estate and real estate related assets that are used primarily for healthcare and healthcare-related purposes (including, but not limited to, hospitals, nursing homes, healthcare facilities and real estate and/or real estate assets used in connection with healthcare research, education, and the manufacture or storage of drugs, medicine and other healthcare goods and devices).
It owns the largest portfolio of strategically located private hospitals in Singapore comprising Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital. In addition, it has high-quality nursing home and care facility properties across various prefectures in Japan, as well as strategically located nursing homes in France. Managed by Parkway Trust Management Limited, PLife REIT has been listed on the Mainboard of the Singapore Stock Exchange since August 2007.
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