Parkway Life REIT

Parkway Life REIT: 4Q15 distributable income and DPU surged 16.1% y/y to $20.4m and 3.37¢, respectively, boosted by partial distribution of divestment gains from the sale of seven Japan properties in Dec '14.

This brought FY15 DPU to 13.29¢ (+15.3%), in line with street expectations.

For the quarter, gross revenue and NPI both rose at a steady 4.8% y/y and 1.2% q/q to $26.3m and $24.6m respectively from upward rent revision and full contribution from seven Japanese nursing homes acquired in 4Q14 and 1Q15.

The healthcare trust achieved full portfolio occupancy with a weighted lease-to-expiry of 9.12 years.

Aggregate leverage dipped marginally to 35.3% (-0.5ppt q/q) with average debt cost of 1.6% (+0.1ppt q/q) and tenor of 3.5 years. Assuming 40% and 45% leverage ratio, the REIT has debt headroom of $131m and $294m, respectively.

In FY15, its three private hospitals in Singapore, comprising Gleneagles Hospital, Mount Elizabeth Hospital and Parkway East Hospital, contributed 62% to overall gross revenue.

The bulk of the remaining 38% came from 43 healthcare properties across Japan, comprising 42 private nursing homes and one pharmaceutical product distributing and manufacturing facility. It also owns a medical centre in Malaysia, which contributes a minimal 0.4% to FY15 gross revenue.

Going forward, PLife expects to continue to reap benefits from robust demand for private healthcare services, supported by favourable rental lease structures, where at least 93% of its Singapore and Japan portfolios have downside revenue protection, and 64% have locked-in rental growth that is pegged to inflation.

Among the three SGX-listed healthcare REITs, PLife is trading at premium valuations, with an indicative yield of 5.9% and 1.3x P/B, compared with First REIT's 7.1% yield and 1.1x P/B, and Religare Health Trust's 8.3% yield and 0.97x P/B.