Sasseur REIT - Maybank Kim Eng 2018-08-07: Mall Than A Shopping Mall

Sasseur REIT - Maybank Kim Eng Research 2018-08-07: Mall Than A Shopping Mall SASSEUR REIT SGX:CRPU

Sasseur REIT - Mall Than A Shopping Mall

Strong maiden earnings, maintain BUY

  • Sasseur REIT delivered strong maiden earnings with DPU of SGD1.587cts for its 28 Mar to 30 Jun 2018 period, 4.6% ahead of its IPO projection. 
  • Sales growth of 16-142% at its four outlet malls outpaced our 3-40% forecasts with momentum expected into the seasonally stronger 2H. Despite strong results, our forecasts and DDM-based SGD0.90 Target Price (WACC: 10.7%, LTG: 3.0%) are unchanged as we await further confirmation due to its brief reporting history. 
  • With downside protection from risk-absorbing EMA structures, the risk to DPU is to the upside given stronger-than- expected sales performance thus far.

~ ~ Where SG investors share

DPU 4.6% ahead on 40.6% y-o-y portfolio sales

  • Total portfolio sales for its 28 Mar to 30 Jun 2018 period jumped 40.6% y-o-y to SGD193.4m or 8.8% ahead of its IPO projection. 
  • Its NPI or rental income from embedded entrusted management agreements (EMAs) was 3.0% ahead of its forecast at SGD32.3m, while its DPU of SGD1.587cts was 4.6% ahead of the SGD1.517cts guidance. 
  • For a seasonally slower quarter, DPU would have met 26.5% of FY18 estimate provided for by the EMA structure, to imply an annualised DPU yield of 8.0%.

All four malls exceeded initial projections

  • All four outlet malls of Sasseur REIT reported improved performance and ahead of its IPO projections, with stronger sales growth for the newer Hefei and Kunming outlets at 70% y-o-y and 142% y-o-y, respectively, exceeding our 35% y-o-y and 40% y-o-y estimates. 
  • Chongqing delivered 16.5% y-o-y sales growth as its sponsor’s restructuring initiatives tie key performance indicators to its tenants’ sales. 
  • Sasseur REIT’s Portfolio occupancy was 94.5% versus 95.1% at end-Feb 2018. Occupancy at Bishan dipped from 91.5% to 88.3% as NLA increased by 2,000 sqm to facilitate its repositioning efforts.

Looking towards seasonally stronger 2H

  • We expect higher occupancies and shopper traffic at its newer outlets to support near-term organic growth into a stronger 2H (Chinese Golden Week holiday, and higher customer and unit sales in the autumn-winter season). 
  • Sasseur REIT’s sponsor, backed by a strengthening outlet mall management track record is eyeing opportunities to implement its ‘N+1’ know-how into other third-party malls that are underperforming. This could boost Sasseur REIT’s medium-to longer term ROFR asset pipeline. 
  • Reiterate BUY.

Swing Factors 


  • Stronger-than-expected growth in leasing demand for retail space driving improvement in occupancy. 
  • Better-than-anticipated rental reversions. 
  • Accretive acquisitions or redevelopment projects. 


  • Prolonged slowdown in economic activity and consumption expenditure could reduce demand for retail space, resulting in lower occupancy and rental rates. 
  • Termination of leases contributing to weaker portfolio tenant retention rate. 
  • Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations. 

Chua Su Tye Maybank Kim Eng Research | 2018-08-07
SGX Stock Analyst Report BUY Maintain BUY 0.900 Same 0.900