Singapore Healthcare REITs: First REIT vs Parkway Life REIT
Singapore’s healthcare REIT segment provides investors with exposure to healthcare-related properties, with both First REIT and Parkway Life REIT showing a strong focus on the healthcare sector. Based on the comparison data, First REIT derives 97.7% of its portfolio from healthcare, with the remaining 2.3% in hospitality, while Parkway Life REIT has 100% healthcare exposure.
However, the two REITs present very different investment profiles. First REIT offers a significantly higher yield and trades below NAV, while Parkway Life REIT has lower gearing and stronger year-to-date performance but trades at a substantial premium to NAV. This creates a clear contrast between a higher-yield, value-oriented profile and a more conservatively valued healthcare REIT.
1. First REIT (SGX: AW9U) — The High-Yield Value Play
First REIT stands out for its combination of a high distribution yield and discounted valuation. At 9.2% yield and 0.86x P/NAV, it offers considerably more income and a lower valuation compared with Parkway Life REIT.
• Tailwinds:
- Attractive Distribution Yield:First REIT’s 9.2% yield is almost twice Parkway Life REIT’s 4.8%. This makes it particularly attractive for investors who prioritise income generation.
- Discount to NAV:With a P/NAV of 0.86, First REIT trades below its net asset value. This provides a potentially attractive valuation compared with Parkway Life REIT, which trades at 1.62x P/NAV.
- Strong Healthcare Focus:Healthcare accounts for 97.7% of First REIT’s portfolio, meaning the REIT remains heavily positioned within the healthcare sector.
- Positive Exposure to Healthcare While Maintaining Some Diversification:The remaining 2.3% hospitality exposure provides a small degree of diversification beyond healthcare, although the portfolio remains predominantly healthcare-focused.
• Headwinds:
- High Gearing:First REIT’s gearing of 45.7% is considerably higher than Parkway Life REIT’s 34.2%. This indicates a more highly leveraged balance sheet and potentially less financial flexibility.
- Weak Year-to-Date Performance:First REIT recorded a -23.6% YTD performance, significantly underperforming Parkway Life REIT’s +0.5%. This suggests that investor sentiment toward First REIT has been considerably weaker over the period shown.
- Significant Valuation Discount:Although the 0.86x P/NAV can be viewed as a value opportunity, the discount also indicates that investors are placing a lower valuation on First REIT’s assets compared with Parkway Life REIT.
- Lower Market Capitalisation:With a market capitalisation of S$445 million, First REIT is substantially smaller than Parkway Life REIT at S$2.676 billion. This gives the two REITs very different market profiles, with First REIT being the smaller counter.
2. Parkway Life REIT (SGX: C2PU) — The Lower-Gearing Healthcare Play
Parkway Life REIT presents a more conservative profile compared with First REIT. The REIT has 100% healthcare exposure, lower gearing of 34.2%, and positive YTD performance of 0.5%. However, investors are paying a substantial premium for this profile, with a P/NAV of 1.62x and a lower yield of 4.8%.
• Tailwinds:
- 100% Healthcare Exposure:Unlike First REIT, Parkway Life REIT’s portfolio is 100% healthcare, providing investors with direct exposure to the healthcare sector.
- Lower Gearing:Parkway Life REIT’s gearing of 34.2% is significantly lower than First REIT’s 45.7%. This provides a comparatively stronger balance-sheet position based on the data shown.
- Positive YTD Performance:Parkway Life REIT recorded a +0.5% YTD performance, compared with First REIT’s -23.6%. This indicates substantially stronger share-price performance over the period shown.
- Larger Market Capitalisation:At S$2.676 billion, Parkway Life REIT has a market capitalisation more than six times that of First REIT. Its larger size distinguishes it from First REIT within the healthcare REIT comparison.
• Headwinds:
- Lower Distribution Yield:Parkway Life REIT’s 4.8% yield is significantly lower than First REIT’s 9.2%. For investors focused primarily on income, this makes Parkway Life REIT less attractive on headline yield.
- Premium to NAV:With a P/NAV of 1.62x, Parkway Life REIT trades significantly above its NAV. This contrasts sharply with First REIT’s 0.86x and means investors are paying a substantial premium for Parkway Life REIT.
- Less Attractive Valuation Compared with First REIT:While Parkway Life REIT has stronger YTD performance and lower gearing, its higher P/NAV and lower yield make it less compelling for investors specifically seeking discounted valuations and higher income.
- Recent Performance Remains Modest:Although Parkway Life REIT outperformed First REIT on a YTD basis, its displayed YTD gain of 0.5% remains relatively modest compared with the significant valuation premium reflected in its 1.62x P/NAV.
POWER UP YOUR REIT ANALYSIS
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- Performance Tracking: TTM DPU and Price History
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Kenny Loh is a distinguished Wealth Advisory Director with a specialization in holistic investment planning and estate management. He excels in assisting clients to grow their investment capital and establish passive income streams for retirement. Kenny also facilitates tax-efficient portfolio transfers to beneficiaries, ensuring tax-efficient capital appreciation through risk mitigation approaches and optimized wealth transfer through strategic asset structuring.
In addition to his advisory role, Kenny is an esteemed SGX Academy trainer specializing in S-REIT investing and regularly shares his insights on MoneyFM 89.3. He holds the titles of Certified Estate & Legacy Planning Consultant and CERTIFIED FINANCIAL PLANNER (CFP).
With over a decade of experience in holistic estate planning, Kenny employs a unique “3-in-1 Will, LPA, and Standby Trust” solution to address clients’ social considerations, legal obligations, emotional needs, and family harmony. He holds double master’s degrees in Business Administration and Electrical Engineering, and is an Associate Estate Planning Practitioner (AEPP), a designation jointly awarded by The Society of Will Writers & Estate Planning Practitioners (SWWEPP) of the United Kingdom and Estate Planning Practitioner Limited (EPPL), the accreditation body for Asia.
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