KEG Royalties Income Fund T.KEG.UN

Interesting commentary

[logicandinertia]

Yes, the quarter was a mess since most of the restaurants were closed , but some tidbits suggest 

the income from interest on the $57 mm Keg loan generates a little over $1mm per quarter.   Combined with the meagre $750k in royalty income , Keg almost covered its 5 percent distribution even with most restaurants closed for much of the quarter.   The difference between distributable cash and distributions was about $275 k, so not material and they maintained a 
Cash balance of around $2.5mm.    

Subsequent to to the quarter end , many stores have reopened for both patio and reduced indoor seating.   The boss said the following:

“...we feel that is a significant indication that the road back to the levels of business we have enjoyed for decades is likely to be less difficult than many have predicted.” 

Even assuming reduced volumes yoy due you due to reduced seating,  a pick up to 50 percent of last year would suggest the ability to materially increase distributions in the fall (as long as no big second wave hits), even with patio shutting down later in the fall.   

Not riskless, but a Cdn institution that has brand loyalty and has dominated in its niche for decades.   At worst, they can maintain the 5 percent yield distribution and at best, materially higher, which would drive the unit price too.

good luck...