Manulife US REIT Analysis @ 4 August 2020

Update: 13 November 2020

The annualized 3 months DPU for 3Q 2016 should be 1.38 instead of 1.508 as mentioned below.

Basic Profile & Key Statistics

Manulife US REIT (MUST) was listed on 20 May 2016 and is trading in USD. MUST invests in office properties across 5 states in US.

Lease Profile

Occupancy is healthy at 96.2%. WALE is long at 5.7 years. From the latest presentation, 55% of the lease by rental income will be expiring in 2025 and beyond without breakdown, if we consider before 2025, then the highest lease expiry of 17.5% falls in the year 2022. All of its properties are freehold. 

Debt Profile

Gearing ratio is slightly high at 39.1%. Cost of debt is high at 3.3% even with 100% secured debt. Fixed rate debt is high at 92.7%. Interest cover ratio is moderate at 3.8 times. WADE is short at 2.3 years where the highest debt maturity of 26.8% falls in the year 2021. MUST has refinanced part of its loan in July, which lowered cost of debt to 3.21%, and increased WADE to 2.8 years.

Diversification Profile

MUST is diversified in terms of geographical, properties, and tenants. Its top geographical, top property and top tenant contributions are low at 34.6%, 18%, and 6.2% respectively.  Its top 10 tenants contribution is moderate at 35.8%. 

Key Financial Metrics

Property yield is slightly high at 6%. Management fee is competitive in which shareholders receive US$ 8.70 for every dollar paid. Distribution on capital is high at 4.5%. Distribution margin of 47.3% is at moderate level. 

Related Parties Shareholding

Sponsor, manager and directos of REIT manager are holding a less significant stake in MUST.

Trend

Note that the actual 3Q 2016 DPU is 2.01 for the period between 20 May 2016 to 30 September 2016, for a fair comparison, I have annualized it to 3 months period to around 1.508. Since listing, MUST had 4 times of equity fundraising for acquisitions, average once per year. Its DPU and distribution margin are on a slight downtrend where NAV per Unit is on a downtrend.

Fundamental Valuation

Favorable	Less Favorable
100% Freehold Properties	Cost of Debt (After Refinance)
WALE	Unsecured Debt
Well Spread Debt Maturity	NAV per Unit Downtrend
Top Geographical Contribution
Top Property Contribution
Top Tenant Contribution
Management Fee
Distribution on Capital

Relative Valuation

i) Average Dividend Yield

Apply past 4 quarters DPU of 5.97 cents to average value of 7.2% will get US$ 0.83. 

ii) Average Price/NAV 

Apply NAV of US$ 0.767 to average value of 1.03 will get US$ 0.79.

Author's Opinion:

MUST have the same equity fundraising frequency as same like KORE, average once per year. For valuation: 

i) Fundamental Intrinsic Value = (Removed)

ii) Relative Valuation - Dividend Yield = US$ 0.83

iii) Relative Valuation - Price/NAV = US$ 0.79

At the current price of US$ 0.78, it looks fairly valued in terms of relative valuation. 

*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.