10/02/2022, 15:30 Brokers' take: Analysts keep 'buy' on Manulife US Reit despite FY21 results missing expectations, Companies

ompanies & Markets - THE BUSINE…

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Brokers' take: Analysts keep 'buy' on Manulife

US Reit despite FY21 results missing
expectations
 THU, FEB 10, 2022 - 12:18 PM

MEGAN CHEAH  megancheah@sph.com.sg

Above: Phipps Tower in Atlanta, US, one of Manulife US Reit's properties. While the manager is keen to
push ahead on acquisitions, Maybank Securities analyst Chua Su Tye cautioned that gearing is at a
historical high of 42.8 per cent and unitholders are thus more likely to see recycling opportunities as
part of near-term portfolio rejuvenation priorities. PHOTO: MANULIFE US REIT

MAYBANK Securities and RHB have lowered their target prices (TP) for US office-based
real estate investment trust (Reit) Manulife US Reit ManulifeReit USD: BTOU +3.17%
after it missed some expectations in its second half and full-year FY2021 results.

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10/02/2022, 15:30 Brokers' take: Analysts keep 'buy' on Manulife US Reit despite FY21 results missing expectations, Companies & Markets - THE BUSINE…

This is despite both brokerages maintaining their "buy" calls in separate reports on
Thursday (Feb 10), on the back of stabilising occupancy rate, completed and possible
acquisitions and divestments in the high-growth sector and the manager's positive
rental reversion guidance for FY2022.

Maybank Securities analyst Chua Su Tye trimmed his TP to US$0.95 from US$1, following
a cut of 5 per cent to distribution per unit (DPU) estimates. He still views DPU visibility as
high and believes it will be well-cushioned from the Reit's low FY2022-2023 lease
expiries, with only 8 per cent net lettable area expiring in FY2022.

Although the FY2021 results were a miss in his view, Chua said valuations are
undemanding at 8.7 per cent FY2022 yield.

He also sees potential upsides from the 3 US properties that were snapped up by
Manulife US Reit in late-December 2021, which boast "high growth" tenancies that
pushed assets under management up 11 per cent to S$2.2 billion half on half.

While the manager is keen to push ahead on acquisitions, he cautioned that gearing is
at a historical high of 42.8 per cent and unitholders are thus more likely to see recycling
opportunities as part of near-term portfolio rejuvenation priorities, before the Reit
makes another sizeable deal.

SEE ALSO
Brokers' take: DBS raises HPH Trust target price to US$0.37

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10/02/2022, 15:30 Brokers' take: Analysts keep 'buy' on Manulife US Reit despite FY21 results missing expectations, Companies & Markets - THE BUSINE…

Meanwhile, RHB analyst Vijay Natarajan cut his TP to US$0.86 from US$0.90, lower than
Chua's current target, as the results were slightly below projections. This includes a 6
per cent environment, social and governance (ESG) premium applied to the TP's intrinsic
value based on RHB's inhouse methodology, which Natarajan credited to the Reit's well-
defined interim ESG targets.

Like Chua, Natarajan also called valuation undemanding at 9 per cent FY2022 yield.
While he likewise trimmed FY2022-2023 DPU estimates by 5 per cent, he expects DPU
going up 3 per cent year on year in FY2022, a turnaround from its 5 per cent decline in
the last 2 years.

On the possibility of further acquisitions, he warned that gearing was on the high side,
and that loans worth around US$200 million are due for renewal this year, although
there may be slight interest savings as these loans were secured at a much higher cost
of 3.4 per annum.

At the same time, DBS Group Research has maintained its S$0.88 TP on "buy" in a
Wednesday report, as it believes the Reit is poised to ride on the office recovery post-
Omicron through its new acquisitions, despite the setback from Covid-19's newer
variants.

The research house noted key positives of improving portfolio occupancy and expiry
leases in FY2022 staying 2.1 per cent below market rents, although it was concerned by
larger occupancy declines persisting in some buildings.

Units of Manulife US Reit were trading at US$0.64, up 1.6 per cent or US$0.01, as at
11.48 am on Thursday.

READ MORE:

Manulife US Reit posts 1.5% increase in H2 DPU, but full year DPU falls 5.5%
Undervalued Reits: selling assets trumps mergers
Brokers' take: Analysts maintain 'buy' on Ascendas Reit post-H2 results with
some lowering TP

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