KGI Research More Upbeat On Manulife US REIT
SINGAPORE – KGI Research has become more bullish on Manulife US REIT that its analyst Joel Ng has upgraded the trust to “outperform”, but it lowered its target price from 86 US cents previously to 82 US cents, reported The Edge on Tuesday evening (7 September, SGT).
The upbeat outlook comes as office assets in the United States are poised to witness rising demand as more staff return to their workplace, even if it’s not full-time.
“Improving fundamentals may finally lift investor confidence in the sector,” Ng said in a research note dated 7 September.
Aside from that, the management of Singapore-listed Manulife US REIT previously shared that it has seen an acceleration in office leasing activity. In fact, roughly 60 percent of its occupants indicated that they intend to return to their workplace starting from this month, and this could increase revenue like parking space income.
Ng also pointed out that the trust has recorded a committed occupancy rate of 91.7 percent and merely 2.9 percent of leases by net leasable area (NLA) are due over the remainder of this year.
In addition, he expects that a bigger percentage of the population in the United States would be returning to the workforce in 2021 amidst the easing of COVID-related restrictions and higher vaccination rate.
Meanwhile, Ng expects Manulife US REIT to offer decent yields of 7.4 percent for fiscal year 2021, before rising to 7.5 percent in FY2022 and 7.6 percent in FY2023.
“MUST’s gearing of 42.1 percent as of 30 June 2021 remains well below the regulatory 50 percent limit, while borrowing costs have declined to 2.99 percent, an improvement of around 20 basis points from December 2020,” he noted.
However, potential risks to the trust include tax changes in the United States that could negatively affect MUST’s distribution per unit (DPU).
“Forex risks (are also a downside) for local investors as revenues, unit price and dividends are in USD. Another potential risk from the impact of COVID-19 is the increased acceptance of work from home and higher-than-expected working from home rate, which may lead to soft office demand,” Ng added.