Prime US REIT reported 1QFY2021 ended March results that were in line with analysts’ expectations, who see an improving outlook ahead as more people in the US return to offices.
Vijay Natarajan of RHB Group Research has kept his ‘buy’ call and target price of US$1 ($1.33), noting that the REIT showed a “resilient operating performance” for the 1QFY2021.
He points out that distributable income only fell 1.2% y-o-y, in tandem with the slight dip in occupancy by 0.7 percentage points to 91.7%. Nonetheless, he highlights that management expects occupancy to pick-up in the coming quarters, while rent collection remains high at 99% and the REIT continues to enjoy strong positive rent reversion at 8.5% for the period.
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Looking ahead, Natarajan is bullish on US office demand, which is expected to recover in 2H2021 as vaccinations and the reopening of the economy see more return to the office.
He also sees room for inorganic growth as cap rates have remained large steady while the REIT’s low gearing level 33.8% provides ample debt headroom for acquisitions. “We anticipate Prime US REIT to acquire US$150 million - US$200 million worth of accretive assets in 2021,” he says.
Meanwhile, PhillipCapital’s Tan Jie Hui has downgraded his rating for Prime from ‘buy’ to ‘accumulate’ as he believes recent share price improvements have likely “priced in some positives”.
SEE:Prime US REIT reports 'stable' distributable income of US$18 mil for 1Q21
Nonetheless, his target price of 94 US cents remains unchanged. Similar to Natarajan, Tan expects a greater return to offices, which will boost the REIT’s leasing activities. “ We expect its portfolio occupancy to improve closer to stabilised levels of 94% - 95% by 1H2022,” he says.
He is also upbeat on acquisition opportunities, citing a higher number of “interesting deals” in the acquisition market of late, particularly for Class A office assets in urban centres.
As at 4.20pm, units in Prime US REIT were 0.5 US cents or 0.59% lower at 85 US cents.
