Sassuer REIT - CGS-CIMB Research 2019-05-14: Delivering With Style


Sassuer REIT - Delivering With Style

  • Sasseur REIT's 1Q19 DPU of 1.656 Scts was in line at 24.7% of our FY19 forecast.
  • Strong tenant sales performance and accretive acquisitions to underpin DPU growth.
  • Maintain ADD. Our DDM-based Target Price remains at S$0.92.

Sasseur REIT's 1Q19 results highlights

  • SASSEUR REIT (SGX:CRPU) reported 1Q19 entrusted manager agreement (EMA) rental income of S$30.9m, exceeding their IPO forecast by 2.4%.
  • DPU of 1.656 Scts is 9.3% above IPO forecast and in line with our estimate at 24.7% of FY19 projections.
  • The improved performance was achieved on the back of strong tenant sales while portfolio occupancy rose 0.9% pt q-o-q to 96.1%.

Strong tenant sales performance

  • Total outlet sales of Rmb1,206m achieved in 1Q19 was 24% higher than in 1Q18 and 10.1% above IPO projections. The improvement was felt across all its outlets, with Chongqing Outlet posting a 15.2% y-o-y increase and the other outlets in Bishan, Hefei and Kunming delivering 25.4-47.1% y-o-y higher tenant sales.
  • Sasseur REIT’s strategy to expand VIP membership resulted in a 15.8% rise in the number of members, thus helping to increase retail sales. This resulted in a 9.4% y-o-y increase in the variable component of its EMA rental income.

Active management to drive membership and sales

  • Sasseur REIT has 57.6% of its leases expiring in FY19 and 26.5% in FY20, largely from its newer outlets such as Kunming and Hefei. We believe active tenant and trade mix management would enable the trust to increase VIP membership and drive tenant sales.

Hefei outlet acquisition to be yield accretive

  • Sasseur REIT recently acquired an additional 6,133.84 sqm of GFA at Hefei Outlet, for S$19.8m. Tenants include fashion brands, an indoor zoo, children’s entertainment facilities and F&B outlets. The purchase is expected to be fully funded by debt and is expected to be yield accretive.
  • Sasseur REIT’s gearing stands at 29.2% at end-1Q19, providing the trust with good debt headroom to pursue inorganic growth opportunities.

Maintain ADD

  • We tweak our FY19-21 DPU estimates marginally post results and to take into account additional contributions from the Hefei outlet purchase. However, our DDM-based Target Price remains unchanged at S$0.92.
  • We continue to like Sasseur REIT for its exposure to the fastest growing part of the retail value chain and attractive FY19 dividend yield of 8.5%.
  • Re-rating catalysts include faster than projected tenant sales and accretive acquisitions while downside risks are slower shopper traffic and spending which would moderate tenants’ sales growth.

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | 2019-05-14
SGX Stock Analyst Report ADD MAINTAIN ADD 0.920 SAME 0.920