Parkway Life REIT - OCBC Investment 2024-10-21: An Anchor Even Amidst An Abating Storm

• Parkway Life REIT's 9M24 distribution per unit (DPU) grew 2.8% y-o-y to 11.3 Singapore cents (or 3.76 Singapore cents for 3Q24, which will be paid out as part of 2H24 DPU), with FX impact on distributable income mitigated by JPY net income hedges.

9M24 gross revenue & net property income down 2.2% & 2.1% y-o-y

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• JPY depreciation was partially offset by contributions from newly acquired nursing homes in Japan and rental step-ups. However, actual FX impact on distributable income was mitigated by JPY net income hedges put in place till 1Q29. As a result, amount available for distribution rose 2.8% y-o-y to S$68.3m for 9M24, translating to a DPU of 11.3 Singapore cents (or 3.76 Singapore cents for 3Q24, which will be paid out as part of 2H24 DPU).
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In terms of capital management, balance sheet remains sound, in our view.

• Parkway Life REIT's gearing has crept up 2.2 percentage points (ppt) from 35.3% as at 30 Jun 2024 to 37.5% as at 30 Sep 2024 as a result of the acquisition of a newly-built nursing home property in Osaka, Japan in Aug 2024, but all-in cost of debt has remained flattish, inching up only 1 basis point (bps) to 1.36% as at 30 Sep 2024 with about 87% of interest rate exposure hedged.
• We note that Parkway Life REIT has refinanced maturing loans due in 2025 and a short-term loan drawn down in relation to the aforementioned acquisition, such that its overall weighted average debt term has lengthened from 3 to 3.8 years with no long-term debt refinancing needs till Sep 2026.

Long-term investors can consider gaining exposure on pullbacks ahead of expected significant DPU growth in FY26 and beyond.

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OCBC Research Team OCBC Investment Research | https://www.iocbc.com/ 2024-10-21 SGinvestors.io

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