Will MUST go bust during this deep recession? How sustainable are its dividends and financials?

Despite the pandemic, our portfolio delivered 20.0% YoY increase in distributable income to US$48.0 million for 1H 2020, while DPU grew 0.3% YoY to 3.05 US cents. Rental collection remained close to 96% in 2Q 2020, with only 0.3% rental deferment and 0.3% rental abatement by income provided to our tenants in 1H 2020.

Our gearing of 39.1% also remains below the MAS requirement of 50% and we have no refinancing due for the remainder of 2020. To provide for corporate, working capital and unforeseen events, we have total undrawn facilities of US$135 million.

With a high occupancy of 96.2%, long WALE of 5.7 years, 3.4% expiries in 2020 and no break clause options in U.S. office leases, we believe that our well-anchored portfolio should be able to ride out the crisis. To-date, no tenants have asked for a reduction in space. They are also not allowed to downsize due to their no break clause option, unless their leases are up for renewal.

In addition, our strategy to fortify MUST’s portfolio through owning top quality buildings is paying off. We have a diversified trade mix of tenants in resilient trade sectors, such as government, legal and finance, blended with companies from across the fast-growing technology and health sectors. The majority of our tenants are listed, government agencies, with more than a third being HQ locations.

MUST is mandated under its Trust Deed to distribute at least 90% of its annual distributable income. With our strong collections to-date, we look to pay out 100% of distributions.

Hi Wilson,

If you look at MUST holdings, it's mostly centered around US municipal services. The underlying bonds are all investment grade with ratings hovering around the medium to high grade ratings by the rating agencies.

Most of the service are considered vital to the different states infrastructure, and is mostly inelastic. Funding of these services are directly obtained from the state taxpayers, and in some cases directly from the consumers. Most also enjoy subsidies from the state governance for operation of key infrastructure.

The only way MUST goes bust, is if there is a systemic default scenario where all of the underlying companies have no source of revenue for their services, which is highly unlikely. There was a short squeeze in March-April, as the different states issued lockdowns, which would result in a drop in revenue mostly in the transportation segments. As long there is a constant demand for transportation, and continual investment in key infrastructure development for the affected US states, it should be quite sustainable.

I do hope i was able to shed some insight!

*This does not constitute as investment advice. Please do your own due diligence before making any investment decisions.