Two charts – Lendlease Reit and Manulife US Reit caught my attention (11 Jul 23)

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Dear all,

Based on my personal reading, since a couple of months ago, investor interest seems to be gradually rotating back into the reit sector. Several reits have caught my attention. For this write-up, I will focus on Lendlease Reit and Manulife US Reit.

 

1) Lendlease Reit closed $0.660

With reference to my write-up on Lendlease Reit dated 3 Jul 2023 (click HERE), I have compiled my key takeaways from my 1-1 meeting with Lendlease Reit’s management and from what I gather from the various analyst reports and my other readings into this write-up. As such, I will not be delving too much into its fundamentals. Please refer to my informative write-up HERE. For Lendlease Reit, I just want to point out two key aspects; its chart and what the investment community feels about Lendlease Reit.

A) Chart – Testing a multi times tested support

Based on Chart 1 below, Lendlease Reit has tested $0.650 – 0.655 numerous times on Oct 2022, Jan 2023, Mar 2023, May – Jul 2023. In fact, Lendlease Reit has tested $0.650 – 0.655 numerous times from late Jun to now. Indicators such as RSI, MFI and MACD seem to be gradually strengthening if I reference the lows on 9 Jun and 10 Jul.

Based on my pure personal observation of price action and chart, barring unforeseen circumstances, there are good odds that Lendlease Reit’s near-term support $0.650 – 0.655 should hold. A sustained breach above its downtrend line (currently around $0.670) with volume expansion is bullish for the chart. Conversely, a sustained downside break below $0.645 with volume expansion is bearish for the chart.

Near term supports: $0.650 – 0.655 / 0.645 / 0.630

Near term resistances: $0.665 – 0.670 / 0.680 / 0.695 – 0.705

Chart 1: Lendlease Reit’s support $0.650 – 0.655 should hold

Chart 1_Lendlease reit 1 year chart 11 Jul 23

Source: InvestingNote 11 Jul 23

B) Analysts are very positive on Lendlease Reit

With reference to Fig 1 below, eight analysts cover Lendlease Reit with either buy, add or outperform calls. Seven analysts have target prices ranging from $0.75 – 1.00. Coupled with the estimated dividend yield of around 7.1%, total potential return is approximately 36% if the consensus is right.

Fig 1: Average analyst target price $0.850; total potential return is approximately 36%!

Fig 1_Lendlease reit average analyst target

Source: Bloomberg as of 11 Jul 23

 

2) Manulife US Reit closed US$0.164

Manulife U.S. Reit has been frequently in the news where there were various media articles ranging from its discussions with Mirae Asset; potential corporate actions; debt levels etc. Share price has tumbled almost 45% from US$0.300 on 30 Dec 2022 to close US$0.164.

Is this a falling knife?

 

Description of Manulife U.S Reit

Manulife US Reit is the first pure-play U.S. office REIT listed in Asia. Manulife US Reit’s portfolio comprises 11 freehold office properties in Arizona, California, Georgia, New Jersey, Oregon, Virginia and Washington D.C. The current portfolio has an aggregate net lettable area of 5.3 million sq. ft and is valued at US$1.9 billion.

On 24 May 2023, Manulife US Reit said it has entered into a letter of intent to sell its Phipps Tower to its sponsor. Click HERE for the announcement.

 

Is Manulife US Reit a falling knife?

A) Chart – Testing a key support level at US$0.165

Based on Chart 2 below, Manulife US Reit seems to be testing its key support 50D SMA (currently around US$0.165-0.166). It broke below this support level on 10 Jul and closed at US$0.160 with a week high trading volume. This marked the lowest close since 22 May albeit on volumes of 5.0m shares which is still below its average 30D of 6.0m shares. If this level US$0.165 – 0.166 fails, the next key support region should be around US$0.150. Conversely, a sustained breach above US$0.180 with volume expansion is very bullish for Manulife US Reit. We should be able to better assess whether the support holds in the next few days.

Near term supports: US$0.165 / 0.160 / 0.150

Near term resistances: $0.171 / 0.180 / 0.192

Chart 2: Manulife US Reit tests key support of around US$0.165 – 0.166

Chart 2_Manulife 11 Jul 23

Source: InvestingNote 11 Jul 23

A) Analysts are very positive on Manulife US Reit

With reference to Fig 2 below, since the start of the year, four analysts have issued updated research reports with average analyst target price at US$0.415. This represents a potential capital appreciation of around 153% if the analysts are right. It is noteworthy that I use the latest four analyst target prices to obtain the average analyst target price of US$0.415. This is more representative than if I were to use all six analyst target prices as Maybank and CLSA targets seem dated. Furthermore, I wish to point out that unlike Lendlease Reit, I didn’t put in the estimated dividend yield for Manulife US Reit as I suspect the consensus FY23F estimated dividend yield of around 23-24% is too high.

Fig 2: Average analyst target price US$0.415; potential capital gain is approximately 153%!

Fig 2_Manulife US Reit analyst target price

Source: Bloomberg as of 11 Jul 23

 

Noteworthy points

As this write-up focuses on charts, I will not be delving too much into the fundamentals. I will like to point out two noteworthy points.

A) Much depends on Phipps Tower

It is common knowledge that the short-term direction of Manulife US Reit’s share price is mainly dependent on the potential divestment of Phipps Tower. To be precise, the timing of the deal, the eventual valuation / selling price of Phipps Tower, the structure of the deal relating to its Sponsor, and how Manulife US Reit can continue to operate after this proposed divestment are likely to be some of the key factors to influence the direction of its share price.

B) Valuation of properties

Pre-pandemic, based on SGX announcements, Manulife US Reit has a practice of doing semi-annual valuation on its properties. It stopped this practice in 2022. Thus, there may be a possibility that Manulife US Reit may revert to a semi-annual valuation on its properties post pandemic. This can strike both ways. A positive front is that if they do semi-annual valuation, it may better reflect the value of its underlying properties and to flush out all the “unknown negative factors”. As UOB KH has put in their report (click HERE), “all bad but negatives may have largely been priced in” which may be a good thing for the share price to find its floor. Conversely, a sharper than expected devaluation in their properties may have an adverse impact to its share price.

For more information, readers can consider listening to this informative podcast by Mr Ben Paul (click HERE).

 

Conclusion

The above write-up focuses on charts with special mention to some noteworthy points. Clients can consider to refer to the analysts’ reports for more information. Among the two reits above, I am vested in Lendlease Reit. There are other reits which I am researching on. Stay tune 😊

Lendlease Reit’s analyst reports can be found HERE.

Manulife US Reit’s analyst reports can be found HERE.

Readers have to assess their own % invested, risk profile, investment horizon and make your own informed decisions. Everybody is different hence you need to understand and assess yourself. The above is for general information only. For specific advice catering to your specific situation, do consult your financial advisor or banker for more information

 

Readers who wish to be notified of my write-ups and / or informative emails, can consider signing up at http://ernest15percent.com. However, this reader’s mailing list has a one or two-day lag time as I will (naturally) send information (more information, more emails with more details) to my clients first. For readers who wish to enquire on being my client, they can consider leaving their contacts here http://ernest15percent.com/index.php/about-me/

 

Disclaimer

Please refer to the disclaimer HERE

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