SINGAPORE (Nov 10): DBS is reiterating its “buy” call on Parkway Life Real Estate Investment Trust with a higher target price of $3.10.
Parkway Life REIT yesterday announced that 3Q17 DPU increased 10.1% to 3.37 cents from 3.06 cents last year on divestment gains.
See: Parkway Life REIT declares 3Q DPU of 3.37 cents, up 10.1% on divestment gains
Excluding one-time divestment gains from four Japan properties, the REIT would have recorded an increase on 2.8% in DPU for the quarter.
Gains from higher rent received from the Singapore properties and contributions from the asset recycling exercise were offset by the depreciation of the Japanese Yen. Hence, Parkway Life REIT saw a 1.4% decline in gross revenue to $27.7 million.
After deducting property expenses, net property income stood at $25.9 million for 3Q17, which was $0.3 million lower than 3Q16.
In a Thursday report, analyst Rachel Tan says that Parkway Life REIT offers one of the strongest earnings visibility profiles among Singapore REITs, with a weighted average lease expiry of close to nine years.
The analyst believes that the REIT is able to deliver steady and sustainable growth in returns through its asset recycling strategies, venturing into a new market and potential acquisition pipelines from its sponsor while maintaining its defensive stance in expansion.
Furthermore, the REIT has a high degree in income visibility from its Singapore hospitals, which underpins a steady growth profile.
“We continue to like Parkway Life REIT for its strong earnings visibility, which is a positive attribute given the current volatile and uncertain market conditions,” says Tan.
As at 2.40pm, units in Parkway Life REIT are trading 5 cents higher at $2.91 or 23 times FY17 earnings with a distribution yield of 4.5%.
