Parkway Life REIT - OCBC Investment 2024-05-02: A Stellar Start To The Year; 4% DPU Growth In Spite Of FX Headwinds

• Parkway Life REIT (SGX:C2PU)’s 1Q24 gross revenue declined 2.7% y-o-y to S$36.3m, as JPY depreciation was partially offset by contributions from properties acquired in FY23, as well as rental step-ups from Singapore hospitals and some Japanese nursing homes. NPI declined by a similar margin (-2.8% y-o-y) to S$34.3m.

Track record of DPU growth continued on the back of JPY net income hedges

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Strong balance sheet and healthy credit metrics

• Parkway Life REIT’s gearing rose 0.8 percentage points (ppt) from 35.6% as at 31 Dec 2023 to 36.4% as at 31 Mar 2024, but remains at a healthy level, in our view. This comes as loans were drawn down for CAPEX and working capital purposes, while the value of investment properties saw a slight decline on the back of JPY depreciation.
• All-in cost of debt remained fairly stable, inching up 3bps to 1.30% over the same period, with 91% of interest rate exposure hedged.
• We note that Parkway Life REIT has no long-term debt refinancing needs until Mar 2025, and an ample debt headroom of S$361.4m and S$629.2m before reaching the 45% and 50% gearing levels, respectively.

We continue to like Parkway Life REIT for its defensive, stable portfolio and steady track record of DPU growth

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Ada Lim OCBC Investment Research | https://www.iocbc.com/ 2024-05-02 SGinvestors.io

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