PhillipCapital analyst Tan Jie Hui has maintained her “buy” call with a higher target price of 94 US cents following the REIT’s 1H20 results.
“We still favour Prime US REIT for its diversified portfolio and organic growth potential derived from rental reversions and escalations,” she says in a report dated Aug 11.
On Aug 6, Prime US REIT declared distribution per unit (DPU) of 3.52 US cents (4.83 Singapore cents) for 1H20 ended June, which represents a 5.1% y-o-y increase from its IPO forecast.
Gross revenue for the half-year period grew 5.7% to US$71.2 million from its IPO forecast of US$67.4 million.
Net property income (NPI) rose 7.6% y-o-y to US$47.5 million, while income available for distribution rose 15.0% y-o-y to US$35.9 million.
Tan says the REIT’s NPI and DPU “slightly surpassed” the brokerage’s expectations, forming 50.6% and 51.5% of its estimates for FY20e.
Despite an overall occupancy dip to 93% q-o-q, Prime US REIT still enjoys a stable lease expiry profile with only 3.3% and 7.4% due to expire in FY20 and FY21, as well as a “long” weighted average lease expiry (WALE) of 4.8 years.
“We remain positive on Prime’s outlook due to its income stability supported by long WALE of 4.8 years, minimal expiries of 3.3% and 7.4% in FY20 and FY21 and high levels of asset and trade sector diversification. No property contributes more than 15.3% to net property income,” says Tan.
“Despite heightened level of cautiousness surrounding new leases and expansions amidst uncertainty, Prime saw robust leasing activity in 1H20 which spilled over to 3Q20. Post 1H20, an additional 36k sqft of renewals and expansion leases were executed by existing tenants at positive reversions,” she adds.
For FY20e and FY21e, Tan has forecasted a total DPU of 7.04 US cents, and 7.32 US cents, with gross revenues of US$151.0 million and US$155.0 million respectively.
Units in Prime US REIT closed 0.5 cents lower, or 0.6% down, at 81 US cents on Aug 11.
