Brokers’ take: CGS-CIMB raises target on Parkway Life Reit by S$0.01 after Japan acquisition

CGS-CIMB on Wednesday (Sept 14) raised its target price on healthcare-focused Parkway Life Reit by S$0.01 to S$5.06 after the Reit announced the acquisition of 3 nursing homes in Hokkaido on Tuesday.

Post-purchase, Parkway Life Reit’s Japan portfolio would be expanded to S$725.3 million, which makes up around 32 per cent of its total assets under management (AUM), noted analyst Lock Mun Yee.

Given that the properties still have a balance lease term of 19 years, Lock believes that this will also extend the Reit’s portfolio weighted average lease expiry from 17.01 years to 17.05 years, thus improving its income resiliency.

She expects the deal to be accretive to the reit’s distribution per unit (DPU) and raised her FY22 to FY24 DPU estimates by 0.3 and 0.5 per cent respectively.

However, with an estimated total return of less than 10 per cent in the near term, CGS-CIMB upheld its “hold” rating.

“With its robust balance sheet, Parkway Life Reit is well placed to continue tapping more inorganic growth opportunities, in our view. We like PReit for its stability, backed by its defensive income structure with in-built escalation features,” said Lock.

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Units of the Reit were trading down 0.4 per cent or S$0.02 to S$4.73 as at 11.54 am.