SINGAPORE (Nov 7): Analysts from UOB Kay Hian and RHB Research are keeping their “buy” recommendations on Manulife US REIT (MUST), with the latter calling MUST one of its top picks in the REITs sector.

This comes after MUST, the first pure-play US office REIT listed in Asia, declared a 3Q DPU of 1.51 US cents, 33.6% higher than a year ago.

Gross revenue jumped 75.3% to US$40.4 million ($55.5 million) on revenue contribution from the four Trophy and Class A quality office properties acquired in 2017 and 2018, while net property income rose 74.9% to US$25.1 million.

See: Manulife US REIT reports 33.6% higher 3Q DPU of 1.51 US cents

“Outlook of the US office market remains rosy, on strong jobs creation and limited micro-market supply. 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,” says RHB analyst Vijay Natarajan in a Wednesday report.

RHB is keeping its target price of 92 US cents on MUST. According to Natarajan, this implies a “20% upside with 8.1% FY19F yield”.

“MUST currently offers FY18-19F yields of 7.7%/8.1% which we deem as highly attractive. In comparison, US-listed office REITs and office S-REITs offer average yields of 4.7%/5.7%,” he adds.

The way UOB lead analyst Loke Peihao sees it, MUST is riding high on a US economy that is on a “sugar rush”.

“The US economy grew 3.5% during the quarter, due to higher consumer spending, non-residential fixed investment and government spending. Unemployment rate also fell to 3.7%, among the lowest in about 50 years,” says Loke.

However, he cautions that “sector specific risks are increasing, which may be reflected in more modest business investments going forward”.

Nonetheless, the brokerage is raising its 2018-20 DPU forecasts by 1-5% on the back of higher rental reversions across US office properties. UOB is raising its target price slightly for MUST to US$1.07, from US$1.06 previously.

According to Loke, there is a positive US office outlook, led by Class A properties.

“Across the seven submarkets MUST has a presence in (except Hudson Waterfront), we also saw tighter occupancies (vs 2Q18) among Class A office inventory based on data released by CoStar,” he adds.

As at 11.59am, units in MUST are trading 1 US cent higher at 77 US cents. According to RHB valuations, this implies an estimated price-to-earnings ratio of 10.7 times and a dividend yield of 8.1% for FY19.