Manulife US REIT (SGX: BTOU) Maintained Slow Growth In DPU
Manulife US REIT (SGX: BTOU)'s 1H20 DPU was up by 0.3% to US3.05 cents. It is trading at 8.3% dividend yield based on its last traded of $0.73 on 1st Oct.
Key Highlights:
Distribution per unit (DPU) and Dividend Yield (8.3%)
Price to book ratio (1.0)
Gearing (39.1%)
Portfolio Occupancy (96.2%)
Interest coverage ratio (3.8x)
Growth catalyst
Background of Manulife US REIT
Manulife US REITĀ (SGX: BTOU), is the first pure US commercial REIT listed in Asia. The REIT manages nine office properties in the US, with a total net lettable area of 3.7 million square feet. It also has a strong sponsor, Manulife Financial Corporation which is a leading Canadian financial services group.
1. Distribution per unit and dividend yield
Net property income jumped 18.8% to US$62.2m. This was mainly contributed by new properties, Centrepointe and Capitol.
Based on its latest price, the REIT is currently trading at about 8.3% dividend yield. Historically, the REIT's DPU has been in the uptrend in the past 3 years.
2. Price to book ratio
Over the past 3 years, Manulife US REIT has been trading at an average price to book ratio of 1.02. Based on its last traded price, the REIT is currently trading at 1.0 price to book ratio.
3. Gearing
Portfolio leverage remains at 39.1%, with a weighted debt maturity of 2.2 years, down from 3.1 years previously. The REIT will not have any debt due for refinancing in 2020.
4. Portfolio Occupancy
Portfolio leverage remains high at 96.2%, with a weighted lease to expiry of 5.7 years. The REIT is in general maintaining a higher occupancy rate as compared to its market average.
5. Interest coverage ratio
Manulife US REIT has a low interest coverage ratio of 3.8 times, which is slightly below our preference of 4 times. The REIT maintains an interest cost of 3.26%, the good news is 92.7% of its debt are on fixed rate.
6. Growth Catalyst
During this Covid-19 period, all its nine office buildings remain open with 10-20% occupied as most of its tenants are working from home. As at 24 July 2020, the manager has collected an average of 96% rents for 2Q20.
Moving forward, the management remains confident of its ability to ride through the pandemic given its well-diversified tenant base. Majority of its properties enjoy higher than average occupancy rate and have rents below their respective markets. This help to provide some buffer during a downturn.
Summary
Manulife US REIT remains a strong office REIT with a portfolio focus in US. It maintains a small growth in DPU despite this pandemic period. The REIT is likely to outperform with its DPU consistency and low leasing risk.
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