Parkway Life REIT - More Japan Acquisitions
- Parkway Life REIT (SGX:C2PU) has announced the acquisition of two nursing homes – Assisted Living Edogawa and Assisted Living Toke - in the Greater Tokyo region, from Daiwa House Industry Co Ltd for a total consideration of ¥2,880m (S$29.4m), or 11.1% below independent valuation. See Parkway Life REIT's announcement dated 2022-09-20 for details of the properties.
- This is Parkway Life REIT’s first acquisition from Daiwa House and initiates a new collaboration with the latter for potential future pipelines of assets, in our view. It expects the transaction to be completed by 3Q22.
- We estimate the purchase could boost Parkway Life REIT’s Japan portfolio to ~S$755m, making up ~34% of its total assets under management (AUM). Under the terms of the agreement, Parkway Life REIT will take over the properties’ existing lease agreements with Zen Wellness Co Ltd (Zen Wellness) which have a balance lease term of 29 years. This will likely extend its portfolio weighted average lease expiry (WALE) from 17.05 years to 17.21 years.
- Parkway Life REIT expects to fund the acquisition with ¥ debt, to provide a natural hedge for foreign exchange risks arising from ¥ denominated assets. According to management, the purchase will likely raise Parkway Life REIT’s proforma leverage ratio from 32.5% (as at end-Jun 2022) to 34.3%. We expect the deal to be DPU accretive.
- We raise our FY22-24F DPU estimates for Parkway Life REIT by 0.019-0.254% to factor in the new income streams. Our DDM-based target price for Parkway Life REIT remains unchanged at S$5.06.
- With its robust balance sheet, Parkway Life REIT is well-placed to continue tapping into more inorganic growth opportunities, in our view. With limited near-term upside, we retain our HOLD rating on Parkway Life REIT.
Above is the excerpt from research report by CGS-CIMB.
Clients of CGS-CIMB may access the full report in PDF @ https://www.itradecimb.com.sg/.
LOCK Mun Yee CGS-CIMB Research | https://www.cgs-cimb.com 2022-09-20 2022-09-20
Previous report by CGS-CIMB:
2022-09-13 Parkway Life REIT - Expanding Japan Footprint
Parkway Life REIT Analyst Report,
Parkway Life REIT Target Price,
Parkway Life REIT Share Price History,
Parkway Life REIT Announcements,
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