Reviewing ParkwayLife REIT's Performance

Parkway Life REIT (PWLR) is one of Asia's largest listed healthcare REITs, and one of the 2 healthcare REITs listed on SGX (the other being First REIT).  PWLR invests in income-producing real estate and real estate-related assets used primarily for healthcare and healthcare-related purposes.  As at 31 December 2023, PWLR's total portfolio size stands at 63 properties totalling approximately S$2.23 billion.  

Since I started revamping my portfolio back in late 2017, till I began blogging down my Barista FIRE investing journey in March 2022, I have slowly accumulated shares of PWLR until it became the largest REIT holding in my portfolio, both capital injected and market value wise.  As posted in April 2022, I wrote about the reasons why PWLR became the largest holding in my dividend portfolio when it has the lowest yield amongst all the REITs.  To this date, 2 years plus later, PWLR remains to be the REIT with the lowest yield at approximately 4% per annum, and it is still the largest holding in my dividend portfolio.  There are many naysayers of PWLR, claiming that it is overvalued and it's dividend yield is too low, making its investment senseless and it will be better to buy T-bills or SSB at current interest rate, which is risk-free.  

Indeed, investing in any REITs is not without any risks.  A quick look at the share price of PWLR shows that it's price fluctuation is not small, even for such a quality REIT.

From 2020 till 2022, it's share price had a great run up from SGD 3.00 to SGD 5.13, up by about 71%, but since the FED started increasing the interest rate at alarming speed, it's share price has also tumbled by from the highs till around SGD 3.60, a decline of almost 30%.  Another reason for the decline is due to the weakening Yen, which inevitably impacted the revenue and income of PWLR, as it derives about 32% of its revenue from Japanese nursing homes.  This is evident in their latest half-yearly earnings release.

As seen above, revenue and net property income for the first half of 2024 declined slightly, largely due to the weakening Japanese Yen.  However, the prudent forex hedging by manager helped to defray this decline, supporting the distributable income (for anyone interested in how forex and hedging works, this YouTuber has explained and illustrated it excellently for the layman).  As such, PWLR once again is able to increase its distribution per unit once again, which is great news for dividend investors like myself.

Since IPO, being the only Singapore listed REIT on SGX that has not done any equity raising through preferential offering or private placement, PWLR's performance is nothing less than spectacular.  This shows the capability and effort of the manager to keep shareholders' interest at heart, with no dilutive moves or acquisitions.

These basically boosted my confidence in PWLR, to continue to grow my investment in the REIT, slowly and steadily, despite it being touted as the most over-valued REIT with low dividend yield which is not a worthwhile investment in current high interest rate environment.  However, I stand by my decision, and I am happy and contented with this investment thus far.

On the flipside, investing in PWLR also has its risks.  Moving forward, it is important to keep a lookout on the actions of Japan central bank.  After a long period of zero to even negative interest rates, Japan central bank is having the intention to raise interest rates recently.  When that happens, depending on the speed and magnitude on the interest rates increment, it may impact the interest cost of PWLR, as most of their debt are in Japanese Yen for natural hedging.  As such, if the rates rise fast and furious, it may be worrisome for PWLR.  However, if that happens, it may also result in the appreciation of the Japanese Yen against Singapore Dollar, which will help to improve the revenue and net property income.  All I can say is it remains to be seen how things will play out as such economics, to me, is never a straight forward thing, especially when I have no financial background.  

Most importantly, I think the future for PWLR still has more bright spots.  After the renewal of the lease with the 3 big hospitals in Singapore in 2021, and once asset enhancement initiatives for Mount Elizabeth Hospital is completed, these will boost the REIT's distributable income in late 2026 by around 20%.  PWLR is also looking into a new 3rd pillar of growth after Singapore and Japan, to further diversify and grow.  In addition, PWLR also has the right of first refusal to acquire Mount Elizabeth Novena Hospital into its portfolio, which will be a giant driver to increase their revenue, net property income and distributable income for sure.  The only thing that investors need to do now, is to remain patient and wait for the good news to be released in time to come.  When will that be, is anyone's guess, but I will remain optimistic about it because I will remain a long-term shareholder of PWLR in time to come.  Though I have to constantly remind myself not to be 'married' to any stocks, instead, always to be logical and trust the numbers from the earnings report rather than by gut feel, nonetheless thus far, PWLR has convinced me with its numbers.  At the meantime, I shall enjoy collecting the half-yearly dividends from the REIT! 

Looking forward to the next great news for PWLR!  Barista FIRE, here I come...!