ParkwayLife just announced its YTD 3Q business update. It continues its stable performance with revenue up by 24.6% and DPU up by 2.8%. On a quarterly basis, the performance is similar to previous quarter.
Similar to other REITS, it has to deal with higher finance cost, which almost doubles as compared to a year ago. However, since it has such a big buffer, the low all-in debt of 1.32% is still very manageable and interest cover of 12.8 times will not sound any alarm.
Beyond that, the biggest risk would come from forex, with Japanese Yen continuing to weaken over the past two years. For ParkwayLife, its income forex risk is mitigated by having JPY net income hedges till 1Q 2027.
Decided to accumulate more due to current favourable price
In an earlier post, I tried to project a probable return 3 years later (when the renewal capex at Gleneagles completes). With the latest information and share price, I decided to update my projection. Please read above post for the basis of my estimation.
If I get it right, then my purchase at $3.37 today will give me a total return of about 37% over 2.5 years. That’s an average annual return of about 13%. Quite nice isn’t it?
Of course, my estimation can be totally off as many things can happen over the next two years. Beside borrowing cost and forex risk, there is sponsor risk too. While thus far, IHH had dutifully paid its rents, there is always a chance that it might face challenges in its business in the future and could not fulfil its obligation. Recession might also happen and tenants could face pressure in paying rents.
If there is recession, then it will affect other businesses too. So whether you are investing in ParkwayLife or other companies, make sure you allocate your assets accordingly to your risk appetite and capacity.
As I mentioned in my post Staying calm when market plunges?, equities take up only 45% of my asset (including CPF), so I am comfortable with my investment today.