SINGAPORE (Jan 5): RHB is keeping Manulife US REIT (MUST) at “buy” with a target price of 96 US cents.

“MUST is the only listed REIT in Asia offering the best proxy to the rebounding US economy and strengthening USD via its three freehold office properties,” says RHB analyst Vijay Natarajan in a Tuesday report.

In addition, Natarajan says Manulife US REIT “offers a superior FY17F yield of 7.7%, which is at a healthy 100bps above its Singapore peers.”

MUST will also act as a hedge against US Fed rate hikes as the REIT’s Asian investors will benefit from the consequent strengthening of the USD.

“While the US Fed Funds rate hike generally has a negative impact on yield instruments like REITs, we believe the impact on MUST may be mitigated, as it would coincide with a pick-up in the US economy and office demand,” says Natarajan.

Manulife US REIT’s portfolio currently comprises three freehold office properties located in the US, with a total value of US$813.2 million ($1.17 billion).

Average occupancy rate of the portfolio stands at 97%, with a long weighted average lease expiry (WALE) of 6.1 years.

“The leases also have inbuilt rent escalation clauses averaging 3% per annum, providing strong visibility on DPU (distribution per unit) growth,” says Natarajan.

MUST’s sponsor, Manulife group, has total assets under management (AUM) of US$718 billion, of which US office assets account for over US$6 billion.

Natarajan says this provides a strong acquisitions pipeline for MUST.

“Near-term acquisitions are expected to be smaller-sized (between US$100-150 million) and geographically-diversified. It targets to acquire one asset a year,” Natarajan adds.

As at 12.17pm, Manulife US REIT is trading flat at 83.5 US cents.