$MANULIFE US REIT(BTOU.SI)$ DBS Group Research has lowered its target price for Manulife US Real Estate Investment Trust (Reit) : BTOU -2.1% by 46.7 per cent to US$0.24 from US$0.45, but maintained “buy” on the counter.

The new target price represents a potential upside of 70.2 per cent from Manulife US Reit’s trading price of S$0.141 as at 11.45 am on Friday (May 19). At the time, the counter was down 1.4 per cent or US$0.002.

The analysts said a capital injection could help ease some of the Reit’s gearing woes. Its aggregate leverage, as of its Q1 2023 operational updates released on May 11, stands at 49.5 per cent, just shy of the Monetary Authority of Singapore’s leverage limit of 50 per cent.

On Apr 12, Manulife US Reit said it is still in talks with Mirae Asset Global Investments over a possible capital injection via a subscription in new units. Around a month later, the manager said it “substantially completed” due diligence processes on the potential deal.

Although dilutive to existing unitholders, this scenario has been “substantially priced in” at the Reit’s current trading price, DBS noted. Assuming the capital raised is at a 10 per cent discount to current prices, the bank estimated that the Reit would still offer a fully diluted yield of around 19 per cent for FY2023, which is still “way above” its historical mean.

To bring gearing closer to a 40 per cent level, US$175 million in overall capital injection would be needed, said DBS. This will allow the Reit to protect itself against possible declines in asset valuations in the future.

https://www.businesstimes.com.sg/companies-markets/brokers-take-dbs-nearly-halves-manulife-us-reits-target-us024-maintains-buy?utm_source=facebook

@SR050321  Good or bad?[Smile]