The REIT expects to book at estimated net gain on disposal of investment property of $0.6m to be recognised.
Net proceeds of the divestment of around $9.2 million will be used to further strengthen PLIFE’s balance sheet in the interim, pending deployment towards higher growth opportunities.
The divestment is not expected to have a material impact on PLIFE’s FY26 distribution per unit (DPU), says Lim.
The divestment aside, the REIT is set to enjoy operational improvements following the completion of a multi-year refurbishment of its flagship hospital here, Mount Elizabeth.
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Dubbed Project Renaissance, Lim calls the works a "strategic transformation rather than a surface-level refurbishment", providing better flexibility and efficiency.
"Altogether, the visit gave us greater confidence that the performance of the Singapore hospitals may exceed minimum rent going forward, thereby allowing PLIFE to participate in revenue sharing," she adds.
Lim, citing the REIT's management, notes that Mount Elizabeth services the most medical tourists amongst hospitals in Singapore, and international revenue is disproportionately higher than volumes due to higher intensity procedures being done. The hospital is still in ramp-up phase post-CAPEX works, and this is expected to last roughly 24 months.
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In her updated model, Lim has taken into account the divestment in Japan and has trimmed her FY2026 DPU estimates by 0.2% and FY2027's by 0.3%, leading to a slightly lower fair value of $4.80.
Based on June 30 closing price of $4.05, Lim's estimated FY2026 yield for the REIT is 4.4%, which is lower than most S-REITs. Even so, she is of the view that this yield is "reasonable" given the REIT’s track record and quality of management.
"We see multiple levers that PLIFE can pull to pursue DPU growth in the medium to long-term. This includes AEI works similar to Project Renaissance at other Singapore hospitals such as Gleneagles, the potential acquisition of Mount Elizabeth Novena (which is likely to take place in tranches given the size of the asset), capital recycling and portfolio optimisation in Japan, and deepening its footprint in Europe – though Singapore will remain the core of its portfolio," says Lim.
Parkway Life REIT units, as at 11.48 am, traded at $4.11, up 0.24%.
