PHILLIP Securities upgraded its call on Manulife US Real Estate Investment Trust BTOU : BTOU 0%(Reit) to "buy" from "accumulate" and raised its target price to US$0.86 from US$0.84 previously.

This comes despite lower-than-expected portfolio occupancy rates in FY2021 which led to a lower DPU of 5.33 US cents, below Phillip's forecast.

With the occupancy lower than anticipated, Phillip lowered expected DPU for FY2022 to FY2024 by 2.1 to 6.3 per cent to factor in the gradual recovery, it stated in a research report on Wednesday (Feb 16).

However, its analyst Natalie Ong noted that the US office market appears to be at an inflection point, which shows recovery in leasing momentum.

She expects DPU to grow to higher levels in the long term and that attributed the change in target price to the expected recovery of the market.

Manulife US Reit reported physical occupancy rates of 25 to 30 per cent and said it provided rental abatement of US$2.4 million in FY2021. Ong said she projects the more pronounced return-to-office to lift carpark income and lower rental abatement burden in the upcoming years.

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The analyst also highlighted that the US office market shows signs of recovery through the improving net effective rents, longer lease tenures signed, decline in subleasing and improving rental growth outlook for Manulife US Reit cities. She said FY2022 renewals could yield positive reversions.

Units of Manulife US Reit were trading at S$0.66, down 0.8 per cent or S$0.005 as at 4.28 pm on Wednesday.

READ MORE:

• Manulife US Reit posts 1.5% increase in H2 DPU, but full year DPU falls 5.5%

• Brokers' take: Analysts keep 'buy' on Manulife US Reit despite FY21 results missing expectations

• Manulife US Reit's private placement closes at US$0.649 per unit