ParkwayLife REIT (SGX: C2PU), or PLife, and Intuitive Surgical, Inc (NASDAQ: ISRG) were among the first major holdings to report their quarterly earnings for the final quarter of 2024.
Coincidentally both are in the healthcare sector, but the similarity ends there. PLife provides real estate for healthcare services, while Intuitive is a leading innovator in robotic-assisted, minimally invasive surgery.
Parkway Life REIT: Another Steadfast Quarter
PLife’s Q3 2024 business update was largely in line with expectations. Revenue and net property income continue to come under pressure from the depreciation of the Japanese Yen and declined slightly.
However, just like the previous two quarters, the amount available for distribution increased due to financial hedges. Its distribution per unit (DPU) for the quarter increased by 1.6% year-on-year (YOY) to S$0.0376. For the 9-month period, DPU is 2.8% higher YOY at S$0.113.
Notwithstanding any unforeseen circumstances, PLife FY2024 DPU should be able to hit another record high of S$0.15. That will translate to a commendable yield of 3.7% base on the latest trading price of around S$4.
While the yield is significant lower than my other REIT holdings, it’s comfortably higher than the latest Singapore Savings Bonds interest of 2.56%.
Given the steadfastness of PLife and the anticipated DPU jump in FY2026 (north of S$0.18), I will be holding on to my current stake.
Intuitive Surgical: Growth Gaining Traction
Intuitive delivered another quarter of strong earnings. Driven by increased placements of systems and procedures, Q3 2024 revenue grew 17% YOY to over US$2 billion. This growth translated into a 34% surge in earning per share (EPS) to US$1.56.
There is much to be optimistic about Intuitive’s growth prospect for the next few years.
The measured rollout of da Vinci 5 this year is paving the way for a wider launch in mid-2025. Outside US, the company just received clearance for da Vinci 5 from Korea. They are also in the midst of getting clearance in Europe and Japan.
Beyond da Vinci 5, they are also expanding geographically for their da Vinci SP and Ion systems in Taiwan, Europe and China.
The strength of the business does not come only for its innovative products, but also with the increased recurring revenue with the higher installed base.
Is It Expensive?
Trading at a price-to-earning (PE) ratio of 84 times its trailing-twelve month earning, there is no doubt that the valuation of Intuitive is high. However, as illustrated in the table below, the company has historically commanded a premium valuation.
I sold part of my holdings in July 2023 at US$337 as I was wary about its elevated PE of 96 times at the time. Although the price dipped below US$300 later in the year, it quickly rebounded.
In hindsight, I would have been better off holding onto my shares. However, without the rearview mirror, I don’t think I would make a different decision at that time.
Despite the stock’s current all-time high, Intuitive is now trading at a more attractive valuation than a year ago. Its improved earnings have led to a lower PE ratio, which is expected to decrease further to 68 times next year.
Considering its historical valuation and strong growth prospects, this PE is palatable. Combined with my reduced stake, I’ve decided to hold onto my remaining shares.
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