Manulife, PRIME, Keppel US: Run Up in Share Price

With the likelihood of no further interest rates hiks, the 3 US Office REITs have risen in prices. Below were the magnitude in their price rise:

Manulife: 95% gain

Prime: 68% gain

Keppel US: 40% gain

Interestingly the magnitude of the rise in stock prices mirrored how dire the balance sheet situation was for each REIT. Manulife carried the highest risk. This no doubt shows the ageless adege "High Risk High Gains"

Will the Share Price Increase Continue?

I had avoided Manulife because it carried the highest risk among the 3 and was the weakest; I am not a hardcore gambler. However, in my view, now that we know the status of each REIT's Interest Rate Coverage ratio in addiiton to their tenancy, their future is much clearer.

So I would say "yes" that these 3 REITs would continue to rise but I am not able to vouch for the magnitude in increase. I believe until end June 2024 and including their dividends, all 3 REITs would nett a positive return. For Keppel US (KORE), I would say the REIT is on the strongest footing with a balance sheet that is even stronger than Suntec REIT and Keppel Singapore REIT. The market will take time to discover this, but I am confident KORE can re-rate to be a 50-60 US cent stocks. 

PRIME too should see an upward rating with a 40-60% chance of it needing a small capital raising. A 22.5 cent share price + 2.4 cents dividend is where I expect it to be by end June 2024.

Of course, all the above depends on no further sudden rate hikes. A rising interest rates affect both the expected cap rate and the required rate of returns. In a way, REITs behave like bonds. Higher interest rates means lower prices and vice versa