Brokers' take

Compiled by Lee Meixian

HUTCHISON PORT HOLDINGS TRUST | BUY

TARGET PRICE: US$0.38

APRIL 16 CLOSE: US$0.33

DBS Group Research, April 16

With Hutchison Port Holdings (HPH) Trust's share price declining by over 10 per cent since it reported its FY17 results, we believe value has emerged at the current price level, implying a dividend yield of 8 per cent.

While earnings remain unexciting given ongoing price pressures, HPH Trust's operations are generating sufficient cash flows to support a generous dividend payout.

We project its FY18 dividends to stay flat from FY17 at 20.6 HK cents (3.45 Singapore cents) versus a guided range of 20 to 23 HK cents.

HPH Trust's share price could re-rate if throughput volumes can more than offset a decline in average tariff rates in the quarters ahead.

Its latest results showed that despite a 3.5 per cent year-on-year improvement in overall revenue to HK$2.7 billion, HPH Trust's net profit fell by 13 per cent to HK$145 million as its wholly owned Hong Kong operations continued to lag.

MANULIFE US REIT | BUY

TARGET PRICE: US$1.00

APRIL 16 CLOSE: US$0.925

DBS Group Research, April 16

Manulife US Reit announced that it has entered into a sale and purchase agreement with its sponsor to acquire two properties - 1750 Pennsylvania Avenue in Washington, DC and Phipps Tower in Buckhead, Atlanta for US$387 million (S$507 million), which is at a 1.8 per cent discount to two independent valuations by Cushman & Wakefield and Colliers.

The properties were acquired on a cash NPI (net property income) yield of 5.2 per cent and 5.9 per cent respectively. Total consideration, including acquisition fees and professional fees, amounts to US$398.9 million.

We are generally positive on the acquisition due to the accretion to distribution per unit, increased resilience of the portfolio as the Reit's weighted average lease expiry has been extended with high-quality tenants as well, and potential upside in rents given that the two properties are under-rented.

However, we believe some investors may question the relatively low accretion of 1.4 per cent given the 2.2 to2.3 per cent accretion from the Reit's other acquisitions. Assuming 50 per cent of the perpetual securities are treated as debt, gearing would rise to over 40 per cent.

For now, the Reit has not finalised the funding for the acquisition.

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