- Prime US REIT (SGX:OXMU)'s 1H23 DPU of US$0.0246 (-30.1% y-o-y) was in line with our estimates at 50% of FY23e forecast. The decline of was due to Prime US REIT increasing management fees paid in cash from 20% to 100%, higher interest expense, lower occupancy, and higher operating expenses. Excluding the change in management fees paid in cash, DPU is still down ~24% y-o-y.
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- Maintain BUY on Prime US REIT with DDM-based target price lowered from US$0.46 to US$0.39. Prime US REIT is currently trading at 0.25x P/NAV, and we believe that most of the negatives are already priced in.
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The Positive
Extension of debt maturities.
- During the quarter, Prime US REIT extended the maturity of its term loan and revolver under its main credit facility (~34% of total loans) by one year to July 2024. As a result, Prime US REIT has no refinancing obligations till July 2024. This gives Prime US REIT more time to secure refinancing and some respite amid the credit crunch situation in the US.
Gearing decreased 0.9ppts q-o-q to 42.8%.
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