]Net property income for 1QFY2025 was $36.8 million, up 7.5% y-o-y, on the back of a 7.3% y-o-y increase in revenue to $39 million. Interest costs increased by 26% y-o-y because of a heavier debt load related to acquisitions and ongoing AEI as well as higher yen base rates.
Gearing was steady at 36.1% while its cost of debt rose to 1.5% in 1QFY2025, versus 1.48% in the preceding 4QFY2024 and coverage ratio was lower at 9.3x, versus 9.8x for 4QFY2024.
In his April 23 note, Krishna Guha of Maybank Securities believes that the outlook for the next four quarters for this REIT remains "positive", as he kept his "buy" call and $4.50 target price on this stock.
"Income from completed AEI will offset higher financing cost," says Guha, referring to ongoing work at the REIT's Singapore hospitals.
See also: JP Morgan upgrades Suntec REIT to 'overweight' on better occupancy, lower interest cost
According to Guha, citing the REIT's manager, it is keen to diversify away from Japan, where it owns a portfolio of nursing homes, into other markets given limited growth.
To this end, PREIT has already expanded into France and potential deals in Europe "will help" although "given macro uncertainties, management is holding back on M&As."
For now, Guha is keeping his forecasts and ratings, as he describes the "consistent delivery" of this REIT.
See also: What does Singapore at 60 mean for the REIT sector?
"While PREIT continues to trade at a tight yield of 3.6% and 70% premium to book, visible DPU growth, strong track record and attractive sub-sector thematic keeps us on 'buy'," says Guha.
Separately, Lock Mun Yee of Li Jialin of CGS International are also bullish on this counter, calling it "in the pink of health".
Besides their "add" call, they have a higher target price of $4.91.
"We like PREIT for its stability, backed by its defensive income structure with in-built rent escalation features," the CGSI analysts state in their April 22 note.
For them, re-rating catalysts include accretive acquisitions.
On the other hand, downside risks include deflationary periods, whereby its inflation-indexed income growth could be dragged down by a lower inflation outlook; potential capex overrun or delays in completion of the asset enhancement initiative at Mount Elizabeth Hospital in Singapore, which could impact operations or returns for the property.
Ada Lim of OCBC Investment Research, meanwhile, has increased her fair value estimate on this stock slightly from $4.60 to $4.65 along with her "buy" call.
For more stories about where money flows, click here for Capital Section
"Amidst the ongoing market volatility and tariff uncertainty, PREIT stands out to us for its defensive portfolio and steady track record of DPU growth," says Lim in her April 23 note.
She likes how the REIT has put in place yen and euro net income hedges till 1QFY2029 and 1QFY2030, respectively, to mitigate income forex risk.
"The fact that 1QFY2025 DPU registered positive growth despite an increase in unit base is also a testament to management's prudence and ability to execute, in our view," says Lim.
She observes that its yield is lower relative to other S-REITs but this is a "reasonable" compromise given its track record and quality of management.
"We also think PLIFE has multiple avenues to further grow its distributions in the medium to long-term, including asset enhancement initiatives at other Singapore hospitals, and making further inroads into Europe," she adds.
Parkway Life REIT units changed hands at $4.19 at 2.41 pm, down 1.18%.
