Parkway REIT unshaken by Japan tragedy

Revenue contributions from 12 Japanese nursing homes boosted the company's NPI 14.6% YoY to S$19.7mln.

The acquisition of the nursing homes in mid-2010 and early 1Q11 further propelled PREIT to achieve its 1Q11 DPU of 2.36 S¢ (+14.0% YoY).

At current levels, PREIT is trading at 5.4% (3.0% spread), a level it traded at during its heyday.

In a statement, DMG Research said it has been business as usual for PREIT post Japan earthquake.

The analyst said the firm's Japanese properties have not been structurally affected by the recent earthquake as its properties are located in regions away from the disaster zone, the nearest being at least 200km from the nuclear plant site.

PREIT's balance sheet also remains healthy with gearing at 34%, even after its purchase of a nursing home in January 2011.

According to DMG Research, this leaves PREIT with ample debt headroom of S$128.4mln to make further acquisitions. Japan, Australia and Malaysia remain its target markets.

The analyst added that despite rising inflation and the uncertainties in the global economy, PREIT's NPI is likely to continue growing, with rent from Singapore properties supported by its CPI+1% growth formula, and its Japan properties having “upwards-only” rental revisions.

DMG Research noted however, that PREIT stocks are no longer affordable as it used to be.

“While we continue to like PREIT for its defensiveness, it is no longer cheap compared with other stocks in the S-REIT space,” the analyst said.