MANULIFE US REIT

MANULIFE US REIT | BUY

NOV 7 CLOSE: US$0.78

TARGET PRICE: US$0.92

RHB Research, Nov 7

Manulife US Reit delivered another solid set of quarterly results, backed by contributions from acquired assets and organic growth.

Portfolio occupancy rate improved in four of its properties, with double-digit rental reversions recorded in Q3.

More importantly, renewed leases registered a strong positive rental reversion of 13.5 per cent, indicating continued strength in the US office market and its asset quality.

While there has been some concerns on potential tax reforms impacting its tax-efficient structure, we believe the probability of any drastic changes is low.

Manulife US Reit currently offers FY18-19F yields of 7.7 per cent/8.1 per cent, which we deem as highly attractive.

Conversely, US-listed office Reits and office S-Reits offer average yields of 4.7 per cent/5.7 per cent.

The counter is one of our top sector picks, but key risks to our call include changes to its tax-efficient structure, ability to retain key tenants, and an unexpected slowdown in office space demand.

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