United Hampshire REIT just released its 1Q results. If one notices, I have started to cover the US based REITs. This is because, in my view they are currently one of the best as an asset class for dividend investors.
Summary (TLDR)
- Revenue Up 11%
- Net Income Up by 13%
- Overall Dividends likely to be higher year on year and set to be 14% yielder
- My view is its undervalued and can be a 9-10% yielder. REIT is in the market of malls and storage places which are in a stronger position than the US office space.
REIT's Property Segment It is In?
For those who are new to hearing about United Hampshire REIT, the REIT consists of a portfoilo of operating malls and self storages spaces. They earn from the rental revenue of leasing spaces. Its malls are anchored by grocery tenants to bring in the shopper foot fall (think of NTUC Fairprice/Cold Storage in Singapore context, but Walmart/Target in US's context). The footfall is then used to entice other retail tenants to bring the mall experience. It operates similarly to Capitaland malls.
For the self storage, it rents space for people to put their items in compartmentalised units.
Well Managed Debt Profile
In the latest update, the REIT has exercised the option to extend its debt maturity to 2026. This leaves all except US$21.1 million in debt to be due in 2026 and beyond. Furthermore, 80% of the debts is fixed at a low rate. This gives it a weighted average interest rate of 3.02%.
Revenue Up Distributable Income Up
Due to the built in rental escalations it has with its tenants, revenue has expectedly increased. However it is worth noting occupancy has been trending down, similar to that in the US office space.
All in all, the continuous increase in rental per square foot has offset the falling occupancy rate. This resulted in the REIT reporting an overall positive revenue growth to offset rising interest expenses and other expenses. This has increased the distribution avaliable for shareholders. It is a positive sign.
Conclusion
The mall and self storage space segments in the US are in a definite better shape than the US office space (Keppel, Prime, ManuLife) is in. Vacancy rates are not in the double digits. This is why despite having all its properties situated in the US, the REIT is priced at 13+% as compared to the other US REITS listed in SGX where the yield is between 15% to 25%. It is a defensive segment to begin with.
I am definitely looking at United Hampshire given its resilient portfoilo occupancy and the fact dividends are growing well despite the challenges in the US economy. The REIT enjoys a long WALE of 7.4 years with a low number of leases (2.1%) expiring this year. This is a big contrast to that of the office spaces. Grocery is a less price sensitive good item as compared to others and hence I am not surprised the trust's occupancy has not deviated downwards much.
Its a definite draw for investors seeking dividends, and I do view the REIT as undervalued. Given the segment it is operating in, I feel it can be a 9-10% yielder when the economic dust settles in USA. At its forward yield of 14%, there is a an approximate 50% upside to its current share price in SGX.
<Not vested in UnitedHampshire at time of writing, but observing>
New to webull? Register here to earn free US$50 in shares which can be encashed anytime after 30 days of sign up
Disclaimer: The publication of my posts is solely for informational purposes and is not to be construed as a solicitation or financial advice as I am not a certified financial adviser. My analysis on companies covered are not an offer to buy or sell any stocks and I encourage readers to do your own due diligence before investing.
No comments:
Post a Comment