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'Buy' Manulife US REIT, Keppel Pacific Oak US REIT on strong fundamentals: RHB

Jeffrey Tan
Jeffrey Tan • 1 min read
'Buy' Manulife US REIT, Keppel Pacific Oak US REIT on strong fundamentals: RHB
Concerns remain on the sustainability of the US REITs' growth, but RHB says the REITs should be able to weather headwinds.
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RHB Securities has recommended investors to “buy” Manulife US REIT and Keppel Pacific Oak US REIT due to their strong fundamentals.

This comes after both REITs posted robust 1H FY20 results despite the number of novel coronavirus (Covid-19) cases continuing to rise sharply in the US.

“Concerns remain on the sustainability of this growth, but our comparison shows [the US] REITs should be able to weather headwinds – backed by asset diversification, long weighted average lease expiry and healthy balance sheets,” RHB analyst Vijay Natarajan writes in a note dated Aug 19.

RHB adds that valuations of US REITs are cheap, with segmental yields averaging 8.3%, or 280 basis points higher than Singapore office REITs.

The brokerage has maintained its “overweight” rating for the sector.

The key risks, however, are a prolonged economic downturn, collapse of co-working office players and policy uncertainties from the upcoming US election.

As at 1.24 pm, Manulife US REIT was down 1 cent or 1.4% at 72.5 US cents with 1.9 million units changed hands.

Keppel Pacific Oak US REIT was up 0.5 cent or 0.7% at 72.5 US cents with 238,900 units changed hands.

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