Brokers' take: Analysts cut Manulife US Reit targets; but believe valuations still undemanding

Vivienne Tay

Published Tue, May 10, 2022 · 11:16 AM

ANALYSTS have trimmed their target prices on Manulife US Real Estate Investment Trust : BTOU 0% (Manulife US Reit). This came as the US-focused Reit saw a dip in portfolio occupancy in the first quarter ended March, although rental reversions improved on quarter.

RHB on Tuesday (May 10) cut its target price to US$0.83 from US$0.86, representing a potential upside of 39.4 per cent from the counter’s trading price of US$0.595 as at 10.59 am. Manulife US Reit units were trading 0.8 per cent or S$0.005 lower at the time.

Maybank Securities shaved its target price to US$0.90 from US$0.95, representing a potential upside of 51.3 per cent.

Both research teams have maintained their “buy” calls on the counter and view Manulife US Reit’s valuation as “undemanding” at an FY2022 yield of about 9 per cent. The Reit is also trading at 0.9 times its book value.

Meanwhile, CGS-CIMB has reiterated its “add” rating on the Reit. It lowered its target price to US$0.86 from US$0.89, to account for a higher cost of equity assumption of 7.84 per cent versus 7.58 per cent previously. The new target represents a potential upside of 44.5 per cent.

CGS-CIMB has kept its FY2022-24 distribution per unit (DPU) projections unchanged, while RHB shaved its estimates by 2-3 per cent after fine-tuning its occupancy assumptions.

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The analysts expect the Reit manager’s new chief executive Tripp Gantt to bring in more merger and acquisition opportunities. However, Maybank expects Gantt to prioritise divestments to fund these acquisitions, given the Reit’s weak share price.

On Monday, Manulife US Reit said that portfolio occupancy for the first quarter ended Mar 31 dipped to 91.7 per cent, down 0.6 percentage point from 92.3 per cent as at end-2021. Its manager noted that occupancy remained above the US Class A average of 83 per cent.