not vested
Manulife US Real Estate Inv (MUST SP): BUY
Market Cap: US$507m
Average Daily Value: US$2.16m
Last Traded Price: US$0.81; Price Target: US$0.91 (Upside 12.6%)
From strength to strength
Unique exposure to US freehold office properties which are at the cusp of a sustained recovery
Reputable Sponsor with a sizeable presence and proven track record in real estate in the US
8% DPU growth in the midst of slowing SREIT market
Initiating coverage with BUY with TP of US$0.91
Freehold properties leveraged to US office recovery. Manulife US REIT (MUST) offers investors a unique opportunity to invest in high quality freehold properties in the US, where the real estate market outlook is favourable and the economy is recovering.
The initial portfolio comprises three Class A or Trophy buildings – Figueroa, Michelson and Peachtree located in the prime areas of:- (1) Downtown Los Angeles,
(2) Irvine, Orange County and
(3) Midtown, Atlanta respectively.
With 15.6% of leases due to expire over FY16-17F, MUST is well positioned to capture the improvement in market rents which according to Colliers is projected to rise by 1.5%-23.0% over 2015-2017 in the areas where MUST’s properties are located.
Long WALE with inbuilt growth. MUST offers strong cashflow visibility with a weighted average lease expiry (WALE) by net lettable area (NLA) of 5.7 years. Beyond a stable income base, the initial portfolio also provides steady organic growth as c.80.2% of leases by NLA have annual rental escalations of between 2.5%-3.5%.
Backed by strong sponsor with robust track record in the US. MUST’s Sponsor is Manulife Financial Group, whose real estate arm has over 70 years worth of experience managing multi-billion dollar global real estate portfolios with particular expertise in the US.
Leveraging on its Sponsor’s skill sets across the real estate value chain as well as strong acquisition track record, MUST is well placed to take advantage of acquisition/inorganic opportunities.
Initiating coverage with BUY. We initiate with a BUY recommendation with a DCF-based TP of US$0.91. MUST offers an attractive combination of high yield (6.8-7.3%) and growth. MUST is projected to deliver 8% DPU growth which compares favourably to the average 2% growth on offer by the S-REIT market.
Source: DBS
https://researchwise.dbsvresearch.com/R ... afbekfdhjg