SINGAPORE (Aug 7): DBS Group Research is maintaining its “buy” call on Manulife US REIT with a target price of US$0.97 on good management, strong fundamentals.
Since its listing nearly two years ago, Manulife US REIT has delivered with distribution per unit (DPU) exceeding IPO forecasts, property values increasing by over 10%.
With the recent US tax cuts expected to spur economic activity and demand for office space, DBS says Manulife US REIT remains an attractive investment, with its original investment thesis of rising rentals and improving capital values remaining intact.
While consensus is bullish on its US exposure, pegging target prices at 1.10 times book value, DBS believes MUST deserves to trade at a higher 1.20 times book value given its ability to execute on DPU-accretive acquisitions and upside risks to its portfolio values as the US office market remains on an upcycle.
Moreover, a premium is justified, as DPU growth over the next two years is 2-3 times higher that of other S-REITs.
“We believe additional acquisitions will remain key share price re-rating catalysts going forward,” says lead analyst Mervin Song, “We understand markets that are of interest are core submarkets that enjoy demand from diversified industries (i.e. manufacturing, financial, technology and law firms) which imply stability across market cycles.”
“With 14% capital upside and 6.5% yield, we maintain our ‘buy’ call,” he adds.
As at 10.29am, units in Manulife US REIT are trading at 86 cents.
