UOB Kay Hian analyst Jonathan Koh says United Hampshire US REIT’s 1QFY2021 ended March results were in line with his expectations.
To that end, he has kept his “buy’ call and target price of 95 US cents for the counter unchanged.
He highlights that the REIT’s reported distributable income of US$7.6 million ($10.1 million) for the 1QFY2021 was underpinned by a resiliency anchored to necessity consumption at supermarkets and home improvement stores. Key tenants such as Walmart, Lowe’s and The Home Depot, which recorded strong sales growth, contributed to the REIT’s stable occupancy at 93.9%.
Koh also notes the REIT’s “healthy” lease renewal, following 15 new and renewed leases for 46,480 square feet of retail space in the 1Q2021. In addition, self-storage facilities also continue to maintain an uptrend momentum.
The analysts highlights that domestic consumption continues to be boosted by vaccinations, with 75% of the US population expected to be vaccinated in the next three months. In addition, many states have also eased safe distancing measures, while US retail sales expanded at a double-digit y-o-y growth rate in March, boosted by healthy job creation and stimulus cheques.
SEE:United Hampshire US REIT reports 1QFY21 distributable income of US$7.6 mil
Koh is also positive on the St Lucie West expansion, which completed ahead of schedule enabling the new Publix Store (54,965 square feet) to open on April 15. The REIT has secured a new lease with Beall’s Outlet Stores with a tenure of seven years, which will occupy 57% of the space that Publix has vacated.
Sustainable growth is also anticipated for the REIT’s self-storage facilities, which are strategically located in the New York metropolitan area where there is an undersupply. “There is healthy growth in demand as homeowners have to de-clutter their homes, shift non-essential belongings to self-storage facilities, so as to create space for their home offices,” Koh says.
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He also cites the REIT’s long weighted average lease expiry of 8.1 years as factor of its income stability, with over 80% of its leases for grocery and necessity retail properties containing built-in rental escalation.
To that end, Koh has kept his target price and rating unchanged. “[United Hampshire US REIT] trades at 2021 distribution yield of 8.8%, which represents an attractive yield spread of 7.2% above the 10-year US government bond yield of 1.6%,” he points out.
As at 4.58pm, units in United Hampshire US REIT are trading flat at 71 US cents.
