Gross revenue jumped 75.3% to US$40.4 million ($55.5 million) on revenue contribution from the four Trophy and Class A quality office properties acquired in 2017 and 2018, while net property income rose 74.9% to US$25.1 million.
“Outlook of the US office market remains rosy, on strong jobs creation and limited micro-market supply. While there has been some concerns on potential tax reforms impacting its tax-efficient structure, we believe the probability of any drastic changes is low,” says RHB analyst Vijay Natarajan in a Wednesday report.
RHB is keeping its target price of 92 US cents on MUST. According to Natarajan, this implies a “20% upside with 8.1% FY19F yield”.
See also: MetaOptics is metalens player ‘with scalable growth’, says UOB Kay Hian in unrated report
“MUST currently offers FY18-19F yields of 7.7%/8.1% which we deem as highly attractive. In comparison, US-listed office REITs and office S-REITs offer average yields of 4.7%/5.7%,” he adds.
The way UOB lead analyst Loke Peihao sees it, MUST is riding high on a US economy that is on a “sugar rush”.
“The US economy grew 3.5% during the quarter, due to higher consumer spending, non-residential fixed investment and government spending. Unemployment rate also fell to 3.7%, among the lowest in about 50 years,” says Loke.
See also: BofA raises target price for SGX to $20.50; valuations look full
However, he cautions that “sector specific risks are increasing, which may be reflected in more modest business investments going forward”.
Nonetheless, the brokerage is raising its 2018-20 DPU forecasts by 1-5% on the back of higher rental reversions across US office properties. UOB is raising its target price slightly for MUST to US$1.07, from US$1.06 previously.
According to Loke, there is a positive US office outlook, led by Class A properties.
“Across the seven submarkets MUST has a presence in (except Hudson Waterfront), we also saw tighter occupancies (vs 2Q18) among Class A office inventory based on data released by CoStar,” he adds.
As at 11.59am, units in MUST are trading 1 US cent higher at 77 US cents. According to RHB valuations, this implies an estimated price-to-earnings ratio of 10.7 times and a dividend yield of 8.1% for FY19.
