There isn’t really much more I can write about Parkwaylife REIT. She has not disappointed since my first buy in 2015. FY2022 was the 15th year that Plife listed on Singapore Exchange. Annual report provided a good infographic of her milestones over this period.
Uninterrupted growth over the past 15 years which included GFC in 2008 and Covid in 2020 shows her resilience and why she is always trading at a premium.
She is not resting on her laurels and the most exciting development over the past few years must be the new master lease that has a favourable lease structure. The new lease structure started in August last year and the renewable work has began this January.
What do I expect in the coming year? (Not a recommendation)
One thing that I am trying to figure out is how the new lease structure will affect its DPU next year. A check back to the related document shows a pro-forma computation based on FY2020 DPU. Based on the calculation, DPU will increase by 0.51 cents by end of Year 1 and up by 4.47 cents by end of Year 4,
Given that the DPU for FY2022 is 14.38 cent, will the DPU for FY2023 be at least 14.89 cents? Note (2) stated that the computation excludes the Renewal Capex Cost. I do wonder what’s the impact on the distributable income and DPU if the Renewable Capex Cost is included. What is clear though is that the Renewal Capex Costs will be incurred over Year 1 to 3 and hence it will not have any impact on Year 4 distributable income or DPU.
Just for fun, I am going to just harness a guess for her share price in 2026. Assuming the increase in DPU is the same as what is shared in the pro-forma, then the expected DPU for FY2026 will be at least 18.85 cents.
Assuming she is trading at a 4% dividend yield, then we are looking at a price of around $4.7. That would give an average annual return of 5.5% over the next 3 years. Assuming no change of DPU for next 3 years, then the average annual return will hit 8.7%.
Not too shabby but the problem is many things can happen during the next 3 years. Having said that, I have confidence in CEO Yong Yean Chau and his team. They have grown the group for 15 years and thus is likely to continue to do so.
At the time of writing, Parkwaylife Reit takes up 7.9% of my portfolio.
Note: The Manager has not received any question from the unitholders of Parkway Life REIT in advance of the AGM. They have responded to the questions which have been submitted by the Securities Investors Association (Singapore). Click here to read the document.