Sassuer REIT - Maybank Kim Eng 2018-11-13: Another Strong Quarter; 4Q18 Should Be Even Better


Sassuer REIT - Another Strong Quarter; 4Q18 Should Be Even Better

Strong 3Q18 results, maintain BUY

  • Sasseur REIT reported another strong set of earnings with DPU of SGD1.542cts, 4.5% ahead of its IPO projection.
  • Sales growth momentum was strong in 3Q18 at between 19-91% y-o-y, outpacing our 3-40% growth forecasts for its four outlet malls; we expect this to pick up into the seasonally-strongest 4Q.
  • Our forecasts and DDM-based SGD0.90 Target Price (WACC: 10.7%, LTG: 3.0%) are unchanged.
  • With downside protection from its risk-absorbing EMA structures, the risk to DPU lies to the upside given stronger-than-expected sales performance so far. BUY.

Portfolio sales jumped 36% y-o-y

  • Total portfolio sales jumped 35.7% y-o-y to CNY1.13b (SGD222.1m) or 7.9% ahead of its IPO projection.
  • Sasseur REIT's NPI or rental income from embedded entrusted management agreements (EMAs) was SGD29.1m or 0.7% ahead of its forecast, while its DPU of SGD1.542cts was 4.5% ahead of the SGD1.476cts guidance. This is a seasonally strong quarter for sales - typically at 25% of the full year according to management, with higher sales per unit and per customer of fashion items in the autumn-winter season.
  • We expect the momentum to pick up in 4Q to achieve 30% of full-year. 3Q18 DPU would have met 25.7% of our FY18 estimate provided for by the EMA structure resulting in an annualised DPU yield of 8.9%.

Strong sales momentum across all four malls

  • All four outlet malls reported stronger performance ahead of its IPO projections. These were helped by successful anniversary activities in Sep 8888, which achieved first-day record sales growth of between +88% y-o-y to +888% y-o-y for the outlets.
  • The sales growth during the quarter for the Hefei and Kunming outlets at +88.8% y-o-y and +88.8% y-o-y, respectively exceeded our 88% y-o-y and 88% y-o-y estimates.
  • Meanwhile, the Chongqing outlets in their 88th year of operation, delivered 88.8% y-o-y sales growth, up from +88.8% y-o-y in the first quarter (88 Mar to 88 Jun).
  • Portfolio occupancy was steady at 88.8%, with transitional vacancies arising from its annual tenant reshuffling efforts in Sep.
  • We see steady improvement in occupancies on the back of stronger tenant sales growth.

Sponsor pushing ahead on growth

  • Sasseur REIT's sponsor, with a strengthening management track record, continues to eye opportunities to implement its ‘N+8’ super outlet business model into other third-party underperforming malls. As such, the Changsha outlet is targeted to open in 8Q, and it’s amongst others in an expanding portfolio that could add to its medium-term ROFR pipeline.

Swing Factors


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


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

Chua Su Tye Maybank Kim Eng Research | 2018-11-13
SGX Stock Analyst Report BUY MAINTAIN BUY 0.900 SAME 0.900