Is First Real Estate Investment Trust Or Parkway Life A Better Buy Now? Part 3
- Original Post from The Motley Fool Sg

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.


The showdown


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.


Conclusion


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.


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Distributions Drop At Parkway Life REIT
- Original Post from The Motley Fool Sg

Parkway Life REIT (SGX: C2PU) has 50 properties – 46 nursing homes and four hospitals located in Singapore, Japan, and Malaysia. The REIT’s market capitalisation currently stands at S$1.68 billion.


The latest report was for full-year earnings for the financial year ending on 31 December 2018.



  1. Gross revenue for the reporting quarter increased by 2.7% year-on-year to S$112.8 million. Net property income rose 2.7% to S$105.4 million. The higher revenue and net property income were on the back of higher rent contributions from its properties. There was also an upward minimum guarantee rent revision of 1.38% for the Singapore hospitals.

  2. Despite the increase in revenue and net property income, distributable income ticked down by 3.5% to S$77.9 million over the same period. This was due to the absence of one-off distributions. Distribution per unit (DPU) as a result came in at 12.87 cents down by 3.5%.

  3. As of 31 December 2018, Parkway’s gearing stood at 36.1% leaving it ample headroom before reaching the 45% limit. The current effective all-in cost of debt stood at 0.97% with an average debt duration of 2.9 years. Parkway’s interest coverage is 13.7 times. The REIT also mentioned that its interest rate exposure and Japan Yen exposure are hedged.

  4. Parkway’s properties are all fully leased with a weighted average lease expiry (WALE) by gross rental income of 7.11 years. The properties have a valuation of S$1.86 billion. The REIT derives 59.8% and 39.8% of its rental revenues from Singapore and Japan, respectively.

  5. Parkway’s net asset value (NAV) increased 6.8% year-on-year, coming in at S$1.88.


The Road Ahead


Mr. Yong Yean Chau, Chief Executive Officer of the Manager, commented:


“With healthy fundamentals in place, underpinned by supportive demographic trends and the higher demand for better quality healthcare and aged care services, the long term outlook of the healthcare industry in Asia remains strong. Nonetheless, we remain cautious and vigilant given the current uncertainties in the macro economy and volatility in the financial markets. We will continue to adopt prudent financial risk management to manage our exposure to interest rate and foreign currency risks, in order to enhance the defensiveness of our portfolio.”


Units of Parkway are currently trading at S$2.78, sporting a price-to-book ratio of around 1.48 and an annualized yield of 4.6%.


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The Motley Fool Singapore writer, Esjay, contributed towards this article.


The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo owns shares in Parkway Life REIT. Esjay owns shares in Parkway LIfe REIT.


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First Real Estate Investment Trust: 3 Reasons For Singapore Investors To Like It Now
- Original Post from The Motley Fool Sg

First Real Estate Investment Trust (SGX: AW9U) has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsors are PT Lippo Karawaci Tbk and OUE Lippo Healthcare Limited.


First REIT’s stocks are currently out of favor among investors. At its current price of S$1.00 (at the time of writing), First REIT’s shares are down by 30% from its high in the last 12 months.


Yet, despite the decline in share price, there are many reasons why the REIT might be a good investment for investors. We discussed the first two reasons in an article here. As a quick recap, those reasons were:



  1. Strong financial track record

  2. Positive result for 2018


In this article, we will continue with the final reason.


Valuation


No investment analysis is ever complete unless we consider the valuation of the REIT. Here, even REIT with solid track record and good prospects might turn out to be a “bad” investment if investors overpay for it.


The good news is that First REIT seems to be trading at an attractive valuation now. This is especially true given the decline in its share price for the past year. Let’s consider the following:



Source: Stock Facts on SGX.com


The table above shows First REIT’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 41 REITs that are in Singapore’s stock market.


What we can see from the above is that the First REIT stock price trades at a significant discount to the market average’s distribution yield. On the other hand, its price to book ratio is comparable to the market average.


Clearly, the market is not overly optimistic about the First REIT now, rendering it a low valuation as compared to its peers.


Conclusion:


In summary, the market is rather pessimistic with First REIT for now. Yet, long term investors might find the REIT a good investment idea now due to its strong financial track record, a positive result for 2018 and low valuation.


Maximise dividends on your REITs with our brand-new Complete Guide To Buying The Best Singapore REITs. We reveal everything we think you need to know about finding the best REITs that hands you a fat dividend cheque ...even if you have no REITs experience at all! Get instant access to your 100% FREE, actionable, 42-page PDF guide here.


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. Motley Fool has a recommendation for First Real Estate Investment Trust.



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Two Reasons For Singapore Investors To Like First Real Estate Investment Trust Now
- Original Post from The Motley Fool Sg

First Real Estate Investment Trust (SGX: AW9U) has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities. The REIT’s sponsors are PT Lippo Karawaci Tbk and OUE Lippo Healthcare Limited.


First REIT’s stock is currently out of favor among investors. At its current price of S$1.00 (at the time of writing), First REIT’s shares are down by 30% from its high in the last 12 months.


Yet, despite the decline in share price, there are many reasons why the REIT might be a good investment for investors. Here are two reasons to like First REIT now.


Strong financial track record


Investors make money from REIT investments in two ways – increase in share price and sustainable distribution per unit (DPU) payout. Both factors, in turn, are driven by how well a REIT can sustain the income of its existing assets, as well as grow its assets, over the long term.


Here, First REIT has shown that it has the capability to grow its asset base over the long term. See chart below:



Source: First REIT’s earnings presentation


As a result of the growth in asset under management, First REIT’s distributable income has grown over the years. See the next chart below:



Source: First REIT’s earnings presentation


From the above, we can see that First REIT has delivered steady growth over the years, both in term of asset under management and distributable income.


Positive result for 2018


Not only did First REIT do well in growing its assets and income over the years, it continued to perform well in the latest financial year ended 31 December 2018.


Here are some numbers: Gross revenue increased 4.7% while its net property income (NPI) improved 4.5%, respectively, as compared to the same period last year. The improvement was primarily due to contributions from the newly-acquired Siloam Hospitals Buton & Lippo Plaza Buton and Siloam Hospitals Yogyakarta, as well as increased rental income from existing properties. Distributable income was 1.5% higher as compared to last year. Consequently, distribution per unit (DPU) came in higher by 0.4% year-on-year to 8.60 cents.


In other words, First REIT managed to sustain its good performance for another year.


Conclusion:


In summary, the market is rather pessimistic with First REIT. Yet, long term investors might find the REIT a good investment idea now due to the reasons mentioned above.


Lastly, if you enjoy the above arguments, look out for the final reason to like First REIT, over the next few days.


Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. Motley Fool has a recommendation for First Real Estate Investment Trust.



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2 REITS That Have Delivered Growth Recently
- Original Post from The Motley Fool Sg

It’s earnings season again.


Real estate investment trust (REITs) have always been one of the favourite investment choices for risk adverse investors due to its stable earnings qualities.


In this article, I will look at two REITs that have lived up to their investors’ expectation by delivering positive performances in their latest earnings updates.


The first REIT on the list is First Real Estate Investment Trust (SGX: AW9U), or First REIT.As a quick introduction, First REIT is a healthcare-focused real estate investment trust. It currently has a portfolio of 20 properties (16 in Indonesia, three in Singapore, and one in South Korea) that are mostly healthcare-related facilities.


For the fourth quarter ended 31 December 2018, First REIT’s gross revenue increased by 2.7% while its net property income (NPI) improved 1.9% as compared to the same period last year. The improvement was primarily due to contributions from the newly-acquired hospitals, as well as increased rental income from existing properties. Distribution per unit (DPU) came in flat at 2.15 cents.


As of 31 December 2018, First REIT’s gearing and committed occupancy rate stood at 35.0% and 100% respectively.


Victor Tan, chief executive of First REIT’s manager, said the following in the earnings release (OUE refers to OUE Ltd (SGX: LJ3) and OUELH refers toOUE Lippo Healthcare Ltd (SGX: 5WA) in the comments below)):


“We are pleased to close the year with stable and credible results underpinned by steady performance from our existing portfolio of 20 properties in Indonesia, Singapore and South Korea. With OUE and OUELH on board, First REIT and Bowsprit are well-positioned to tap on the growing opportunities in the Asia Pacific region to capitalise on the tremendous growth in demand for quality and affordable healthcare. In addition to the right-of-first-refusal to Lippo Karawaci’s pipeline of properties for acquisition in Indonesia, we now also have a first-right-of-refusal from OUELH. Our roadmap for the next three to five years is to look at asset rebalancing, diversifying our income streams by expanding into other geographical regions, as well as exploring opportunities to unlock the value of our existing assets.”


The next REIT on the list is Mapletree Logistics Trust (SGX: M44U).As a quick introduction, Mapletree Logistics Trust, or MLT, is a REIT that owns 140 logistics properties around Asia-Pacific region that includes Singapore, Hong Kong, Japan, China, South Korea and Australia.


In the latest quarter ended 31 December 2018, MLT reported that gross revenue grew 23.0% to S$120.8 million while NPI jumped 25.9% to S$104.5 million.


Also, DPU was up by 5.0% year-on-year to 2.002 cents, mainly due to the higher net property income.The growth in DPU was achieved despite an increase in units from 3.1 billion a year ago to 3.6 billion in the reporting quarter. The stronger performance was mainly driven by growth from the existing portfolio as well as contributions from new acquisitions.


Ng Kiat, chief executive of MLT’s manager, commented:


“Amidst the volatile economic environment, we remain vigilant and focused on working closely with our tenants to maintain a stable portfolio performance. During the quarter, we have strengthened MLT’s portfolio with the acquisitions of three quality logistics facilities in Australia, South Korea and Vietnam and the divestment of a warehouse with older specifications in Singapore. We will continue to keep the momentum on portfolio rejuvenation through quality acquisitions and selective divestments.”


As of 31 December 2018, the REIT’s gearing stood at 38.8% while its occupancy rate was 97.7%.


Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!


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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. Motley Fool has a recommendation for First Real Estate Investment Trust.


$IHC(5WA.SI) $First Reit(AW9U.SI) $OUE(LJ3.SI) $Mapletree Log Tr(M44U.SI)

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Is First Real Estate Investment Trust Or Parkway Life A Better Buy Now? Part 3
- Original Post from The Motley Fool Sg

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.


The showdown


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.


Conclusion


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.


Stop worrying about the uncertain REITs market with our new Complete Guide To Buying The Best Singapore REITs. We give you 3 quick ways to easily value your REITs so you save tons of research time. Value your REITs today so you know exactly when to buy, sell or hold. Simply enter your email here and we will rush the 42-page PDF immediately to your inbox...for FREE!


More reading



The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn't own shares in any companies mentioned. Motley Fool has recommendations for Parkway Life REIT and First Real Estate Investment Trust.



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