SINGAPORE (Oct 28): CIMB Securities is reiterating its “add” recommendation on Parkway Life REIT (PLife REIT) with an unchanged target price of $2.78 following its release of financial results for 3Q16.

Although the healthcare REIT posted an 8.8% blower 3Q DPU of 3.06 cents compared to 3.36 a year ago, revenue grew 8.2% while net property income (NPI) increased 8% y-o-y.  

(See also: Parkway Life REIT’s 3Q DPU falls 8.8% to 3.06 cents on absence of one-off gain)

In a Thursday report, analysts Lock Mun Yee and Yeo Zhi Bin note that PLife REIT’s Singapore portfolio – which accounts for 58.6% of revenue and 60% of NPI for the quarter – benefited from a resilient rent structure, given higher contributions from its Mount Elizabeth and Gleneagles Hospitals.

Revenue and NPI from the REIT’s Japan portfolio, too, was spurred by organic and inorganic improvements such as its recent nursing home purchase and the completion of its Sawayaka Kiyotakan asset enhancement initiative (AEI).

“PLife REIT has completed its debt refinancing needs for FY16 and has no loans due till 2HFY18. 98% of its interest rate exposure is hedged and gearing is at a healthy 38.2%,” highlight Lock and Yeo.

They believe this puts the trust in a strong position to pursue more inorganic growth potential, in tandem with its strategy to optimise portfolio quality and returns through recycling and redeploying capital.  

“PREIT offers investors earnings stability from its long average lease expiry profile of 8.69 years, resilient rent structure and downside protection for 92% of its gross revenue,” say the analysts.

Units of PLife REIT are trading at $2.55 at 4.07pm.