Investment thesis
Outlook
As of June 2022, office-using employment increased by about 1.6 million (+4.8% YoY), and there were 1.06 million (+3.2%) more office-using workers than before the pandemic began. The US job market remain healthy and this has spurred many companies to add office space to house a larger workforce.
Leasing activity picked up in 1H22 with stronger demand coming from the financial, professional services and healthcare sectors. Physical occupancy across the portfolio is at c.50% as more tenants implement their return-to-work plans. With in-place rents c.5.3% below asking rents, PRIMEβs portfolio is primed for more positive rental reversions.
Maintain BUY, and DDM TP lowered from US$1.00 to US$0.88.
DDM-TP lowered from US$1 to US$0.88 as we trim our FY22e-FY24e DPU by 1-2%. Our COE nudged up from 9.6% to 10.55% on higher risk-free rate assumption and market risk. The current share price implies FY22e/FY23e DPU yield of 11.4/11.6%. PRIME is our top pick in the US office sector for greater tenant exposure to STEM/TAMI sectors and the resiliency of its portfolio. Catalysts include improved leasing and a greater return to the office. PRIME is also trading at an attractive 25% discount to book.
Darren has over three years of experience on the buy-side as a fund manager. During his time as fund manager, he has managed multiple funds and mandates including dividend income, growth, customised, Singapore focused and regionally focused funds. He graduated from the University of London with a First-Class Honours degree in Banking and Finance.