Sasseur REIT - Maybank Kim Eng 2019-08-06: Growth Momentum Into 2H


Sasseur REIT - Growth Momentum Into 2H

In line; maintain BUY

  • SASSEUR REIT (SGX:CRPU) has delivered results ahead of its IPO projections for the fifth consecutive quarter, with momentum gathering going into its seasonally stronger 2H. DPU of SGD1.61 was 10.5% ahead of projections, with 1H DPU at 52% of our FY19E forecast.
  • Portfolio sales jumped 15.4% y-o-y. Its outlet malls in China remain well-placed to play into the market’s retail premiumisation trend, as they gain wallet share among brand-conscious yet price-sensitive aspirational consumers.
  • Factoring in its recent Hefei acquisition, we lift DPUs by 1-1.3% and our DDM-based Target Price to SGD0.95 (COE: 9.9%, LTG: 3.0%).
  • We see further catalysts from strong portfolio sales and contributions from potential acquisitions.

Another strong quarter for all four malls

  • Portfolio sales jumped 15.4% y-o-y as sales increased at all four outlet malls, by 4.0-35.4% y-o-y. Portfolio occupancy dipped q-o-q from 96.1% to 95.8% with transitory vacancies at Hefei (from 97.0% to 93.3%) due to trade-mix adjustments. Its other outlets continued to deliver better occupancies: Chongqing (98.9% to 100.0%), Bishan (90.5% to 92.7%) and Kunming (97.2% to 97.9%). As a result, 2Q19 EMA rental income was 2.7% ahead of projections.
  • Fashion, sports and international brands continued to generate the bulk of its AUM contributions, at 57.7% of NLA and 72.5% of revenue.
  • Proactive leasing helped to increase the mix of higher-yielding F&B tenancies: up q-o-q from 6.2% to 6.4% of its NLA, with stronger growth in revenue contributions, from 2.9% to 5.6%.

Hefei deal lifts DPUs; expecting more

  • We have factored in its acquisition of additional shop units backed by existing tenancies at the annex block of its Hefei outlets, which was completed on 14 May 2019. Its ownership of the property has risen from 77.8% to 81.2% of GFA, which lifts our FY19-20E DPUs by 1-1.3%.
  • We expect Sasseur REIT to eye more meaningful deals, given a visible medium-term pipeline from its sponsor’s expanding property portfolio: two ROFR assets and seven others, which in aggregate could boost its GFA by 4x.

Chua Su Tye Maybank Kim Eng Research | 2019-08-06
SGX Stock Analyst Report BUY MAINTAIN BUY 0.95 UP 0.900