What’s Ahead For Parkway Life Real Estate Investment Trust (SGX:C2PU)?

Parkway Life Real Estate Investment Trust (SGX:C2PU), a SGD$1.80B small-cap, is a real estate company operating in an industry which remains the single largest sector globally, and has continued to play a key role in investor portfolios as an asset class. Real estate investment trust, or a REIT, is a collective vehicle for investing in real estate that began in the US and has since been adopted worldwide as an investment asset. Real estate analysts are forecasting for the entire industry, negative growth in the upcoming year , and an overall negative growth rate in the next couple of years. Unsuprisingly, this is below the growth rate of the Singapore stock market as a whole. An interesting question to explore is whether we can we benefit from entering into the real estate sector right now. Below, I will examine the sector growth prospects, and also determine whether Parkway Life Real Estate Investment Trust is a laggard or leader relative to its real estate sector peers. View our latest analysis for Parkway Life Real Estate Investment Trust

What’s the catalyst for Parkway Life Real Estate Investment Trust's sector growth?

Issues around rate hikes and yield changes have made investors sceptical of REITs. The capacity for these investment vehicles to absorb a rate hike should be considered, hence, factors such as lease durations and pricing power in the market would require a deeper dive. In the past year, the industry delivered negative growth of -4.80%, underperforming the Singapore market growth of 7.92%. Parkway Life Real Estate Investment Trust leads the pack with its impressive earnings growth of 46.40% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be -21.07% compared to the wider REIT sector growth hovering next year. As a future industry laggard in growth, Parkway Life Real Estate Investment Trust may be a cheaper stock relative to its peers.

Is Parkway Life Real Estate Investment Trust and the sector relatively cheap?

The REIT industry is trading at a PE ratio of 16x, in-line with the Singapore stock market PE of 15x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 7.02% on equities compared to the market’s 7.94%. On the stock-level, Parkway Life Real Estate Investment Trust is trading at a PE ratio of 18x, which is relatively in-line with the average REIT stock. In terms of returns, Parkway Life Real Estate Investment Trust generated 9.64% in the past year, which is 2.62% over the REIT sector.

What this means for you:

Are you a shareholder? Parkway Life Real Estate Investment Trust is a REIT industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If your initial investment thesis is around the growth prospects of Parkway Life Real Estate Investment Trust, there are other REIT companies that are expected to deliver higher growth in the future, and perhaps trading at a discount to the industry average. Consider how Parkway Life Real Estate Investment Trust fits into your wider portfolio and the opportunity cost of holding onto the stock.

Are you a potential investor? If Parkway Life Real Estate Investment Trust has been on your watchlist for a while, now may not be the best time to enter into the stock. Its growth is expected to be lower than its REIT peers in the near term, and it is also trading at a PE in-line with these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the real estate sector.

For a deeper dive into Parkway Life Real Estate Investment Trust's stock, take a look at the company's latest free analysis report to find out more on its financial health and other fundamentals. Interested in other real estate stocks instead? Use our free playform to see my list of over 100 other real estate companies trading on the market.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Simply Wall St analyst Simply Wall St and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.