Positive 4QFY10 results. Currently, there are only two healthcare REITs listed on SGX. They are First REIT (FREIT) [BUY, FV: S$0.80] and Parkway Life REIT (PLREIT) [NOT RATED]. FREIT and PLREIT both reported a respectable set of 4QFY10 results recently. FREIT's growth was largely driven by higher rental income from its Indonesian properties; while PLREIT registered a 16.1% YoY increase in DPU to 2.38S cents as a result of higher rent from its Singapore hospitals and contribution from the 11 Japan nursing homes acquired in 2010.
Favourable stable and long master leases. Both healthcare REITs function on long-term master leases that offer downside revenue protection, hence providing investors with stability. Moreover, there is also potential upside rental reversion that can be reaped. These master leases are important because the operations for healthcare REITs are specialised. Hence having the right operator/master lessee is critical as frequent turnover of operators would be very disruptive to operations.
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