Morgan Stanley has awarded an Overweight rating on the recently floated $237 million Arena REIT (ASX:ARF), describing its property portfolio of child care...

Joanne Ma
Joanne Ma Livewire Markets

Morgan Stanley has awarded an Overweight rating on the recently floated $237 million Arena REIT (ASX:ARF), describing its property portfolio of child care centres as an attractive asset class. Real estate analysts, Lou Pirenc and John Meredith, point out the stock has risen in value by 14% since its listing in June and predict further gains as the trust branches out to similarly responsible asset classes like healthcare and education. Analysts calculates this growth will also lead to a 15% lift in its key earnings metric of funds from operations given the strength of its balance sheet, which could sustain some $100 million in fresh acquisitions or developments without significantly impacting gearing levels. Nonetheless, the child care sector remains dependent on government funding and any policy changes could impact Arena's four tenants. Morgan Stanley's target price is $1.25, implying an 8.7% increase from its current level. (VIEW LINK)

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