To Natarajan, the outcome, should it materialise, will be a “positive catalyst” in his view as the deal will address several issues such as MUST’s gearing and future growth trajectories.
“We assume Mirae will subscribe for the maximum 9.8% stake or [around] 174 million new units. This works out to a new issuance share price of 48 US cents, i.e. a 13% discount to its net asset value (NAV), based on above proceeds,” says the analyst.
“Such a transaction will result in pro forma (FY2022) distribution per unit (DPU) and NAV dilutions of 9% and 1%,” he adds.
More importantly, Natarajan points out that Mirae’s assuming debt repayment will lower MUST’s gearing to just below 45%, which is the official threshold limit for REITs with an interest coverage ratio (ICR) below 2.5x. MUST’s latest ICR stands at 3.1x.
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In his report dated March 16, Natarajan has kept his earnings unchanged. His target price includes a 6% premium due to MUST’s high environmental, social and governance (ESG) of 3.3 out of 4.0.
As at 10.53am, units in MUST are trading 0.5 US cent higher or 1.89% up at 27 US cents.
