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Summary of Broker’s Recommendation
| Stock Code | MREIT |
| Company Name | MREIT, Inc. |
| Broker | AP Securities |
| Opinion Issued on | 17 Oct 2024 |
| Recommendation | Buy |
| 1-Year Target Price | PHP 16.05 |
We continue to recommend a BUY for MREIT despite their relatively slow pace of infusions, and the lack of diversification in its portfolio which is 100% composed of offices. Our recommendation is primarily anchored on their 96% occupancy rate (which is substantially higher than industry), alongside stable dividend pay-outs. Lastly, the fulfillment of their retail infusion promises in the following years should help put MREIT into a higher-tier than where it is right now.
Analysis and Opinion
Infusion finally approved
MREIT recently published a press release indicating that the SEC approved their infusion of 6 prime offices, boosting their portfolio by 48%, to end up at 482k sqm which places the company closer to its 500k sqm goal by the end of the year. MREIT will be issuing 926.16-Million shares at a price of P14.20 which values the transaction at P13.15-Billion. This would put MEGâs ownership in MREIT to 63.44% from 51.33%. According to management, these assets would start contributing to MREITâs earnings by the 4th quarter (Q4).
Better than nothing
The vacancies resulting from the exit of POGOs, alongside downsizing from BPOs following the emergence of WFH and hybrid work set-ups could result in overall market vacancy breaching 20%. Despite our cautious outlook on the office segment, we still see this infusion as a step in the right direction in the sense that it would still result in dividend accretion for investors.
A glimmer of hope
We note that management has previously stated intentions to infuse retail assets to MREIT. The completion of this would definitely benefit the companyâs earnings substantially on the back of improving outlooks for consumption amidst moderating inflation. The eventual pick-up in consumer demand should translate to higher occupancy in malls as mall tenants position themselves to cater to demand.
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Commentary: POGO exit starting to affect office vacancies