Parkway Life Reit Initiated with “Buy” Call and S$4.10 Target Price
MAYBANK Securities has initiated coverage on Parkway Life Real Estate Investment Trust (Reit) with a “buy” call and a S$4.10 target price.
Analyst Expectations
In a report on Wednesday (Jan 8), analyst Krishna Guha noted that even though the stock is expensive, it is defensive given the Reit’s “strong record of uninterrupted recurring dividend growth”.
Reasons for the “Buy” Call
Guha said: “While the yield spreads are tight, we view that the attractive attributes and favourable sector or thematic justify the premium valuation.”
Target Price
The target price is based on 7 per cent cost of equity and 2 per cent medium-term growth rate. The Reit currently trades at 1.55 times its price-to-book ratio at its historical mean, and has a tight yield spread of 130 basis points.
Growth Strategy and Distribution Profile
Guha is also positive about Parkway Life Reit’s growth strategy and growing distribution profile from lease renewals.
Estimated Distribution Per Unit Growth
He estimates that the Reit’s distribution per unit for financial years 2024 to 2026 will grow at a compound annual growth rate of 7.2 per cent. This will be backed by in-built rent escalation in Singapore and acquisition in France, he noted.
Recent Acquisition in France
In October 2024, Parkway Life Reit purchased 11 nursing homes in France for a total consideration of about 111.2 million euros (S$159.9 million). Its maiden accretive investment helped the Reit to establish a third key market besides Singapore and Malaysia, and Japan.
Properties Leased to DomusVi
The properties will continue to be leased to DomusVi, under a new lease term of 12 years, after the deal goes through. This tie-up is likely to help the Reit scale its presence, said Guha.
Conclusion
Overall, MAYBANK Securities is positive about Parkway Life Reit’s growth prospects and believes that the stock is a good buy.
FAQs
Q: What is the target price for Parkway Life Reit?
A: The target price is S$4.10.
Q: What is the estimated distribution per unit growth for Parkway Life Reit?
A: The estimated distribution per unit growth is 7.2 per cent for financial years 2024 to 2026.
Q: What is the reason for the “buy” call on Parkway Life Reit?
A: The analyst believes that the attractive attributes and favourable sector or thematic justify the premium valuation.
Q: What is the recent acquisition in France?
A: Parkway Life Reit purchased 11 nursing homes in France for a total consideration of about 111.2 million euros (S$159.9 million).
