SINGAPORE (Apr 24): CGS-CIMB Research has maintained its “hold” rating with an unchanged target price of $3.38 for Parkway Life REIT (PLife REIT).

This comes as the brokerage noted that PLife REIT’s 1Q2020 distribution per unit (DPU) of 3.32 cents was “within expectations, at 25%” of the brokerage’s FY2020 forecast.

See also: PLife REIT posts 1.4% increase in 1Q DPU to 3.32 cents despite Covid-19 outbreak

The brokerage has also reduced its DPU forecast for FY2020 by 1.1% to factor in the $1.7 million set aside to aid tenants affected by the Covid-19 pandemic.

In a Tuesday report, analyst Lock Mun Yee believes that PLife REIT possesses a stable yield backed by its defensive income structure due to its reinforced balance sheet with a longer debt maturity profile and lower-cost debt.

According to Lock, PLife REIT has a gearing at 38.5% at end 1Q2020, and a debt headroom of $240 million, “assuming a gearing limit of 45% to tap potential inorganic growth opportunities”.

“While we like PLife REIT for its stable yield backed by its defensive income structure, our recommendation remains a ‘hold’ given the 5.6% total returns potential based on the current share price. Upside risks include accretive acquisitions, while downside risks include deflationary periods whereby Singapore rent revisions would revert to 1%,” she says.

As at 12.34pm, units of Parkway Life REIT are trading 4 cents lower, or down 1.2% at $3.36.