Parkway Life REIT (SGX: C2PU) and First Real Estate Investment Trust (SGX: AW9U) are real estate investment trusts (REIT) focusing on healthcare and healthcare related real estate assets throughout Asia.
In general, healthcare related REITs have stable earning power by owning assets like hospitals and nursing homes. Such stability of income would appeal to conservative income investors, especially those who seek to generate sustainable dividend from their investments.
For those investors, they might want to know which of the following two REITs is a better buy now. Clearly, there is no easy answer to this. After all, we don’t know what will happen in the future.
Nevertheless, we will like to put the duo to a test that is made up of three parts. In our previous articles, we looked at the REITs’ track record of growth in distribution per unit (DPU) in the last decade, as well as their debt profile. First REIT came ahead in distribution growth while Parkway Life REIT had a more favorable debt profile. In this article, we will focus on the last part of our comparison – valuation.
We will focus mainly on two valuation metrics which are ‘price to book (PB) ratio’ and ‘distribution yield’.
Let’s begin PB ratio. Parkway Life REIT and First REIT have PB ratio of 1.5 and 1.0, respectively. The lower PB ratio for First REIT suggests that it has a lower valuation.
And now we will look at the distribution yield. Parkway Life REIT and First REIT have adistribution yield of 8.3% and 4.8% respectively. The higher a REIT’s distribution yield is, the lower is its valuation. Thus, we can see that First REIT has a lower valuation based on distribution yield.
From the above, we can conclude that First REIT has a lower valuation for now, given its low PB ratio and high distribution yield.
In summary, First REIT came out ahead of this race here due to its better track record of growth in distribution per unit (DPU) in the last decade and lower valuation.
$First Reit(AW9U.SI) $ParkwayLife Reit(C2PU.SI)