S-REITs Weekly - UOB Kay Hian 2020-05-19: Second Week Of Consolidation With S-REITs Easing 2.2%

SASSEUR REIT (SGX:CRPU)

S-REITs Weekly - Second Week Of Consolidation With S-REITs Easing 2.2%

UOBKH S-REIT Index declined slightly by 2.2% to 221.9 last week. Dr Michael Ryan, Executive Director of Health Emergencies Programme at World Health Organisation (WHO) warned that “this virus may become just another endemic virus in our communities. This virus may never go away.” This is a solemn reminder that the road to recovery is long and arduous. Thus, share prices continued to consolidate during the week.
Top outperformer: ESR REIT (SGX:J91U) gained 2.9% as Director Tong Jinquan bought 5.2m shares. United Hampshire US REIT (SGX:ODBU) gained 2.5% as the state of New York, which is the worst hit, began its phased reopening last week. Mapletree Logistics Trust (SGX:M44U) gained 1.1% due to its inclusion into MSCI Singapore Index. Sasseur REIT (SGX:CRPU) gained 0.7% due to optimism on reopening of its four outlet malls in China.
Top underperformer: Mapletree North Asia Commercial Trust (SGX:RW0U) corrected 8.5% due to resumption of protests in Hong Kong after easing of social distancing measures. Hospitality REITs Frasers Hospitality Trust (SGX:ACV), ARA US Hospitality Trust (SGX:XZL), Far East Hospitality Trust (SGX:Q5T) and CDL Hospitality Trusts (SGX:J85) declined 10.4%, 7.4%, 7.1% and 4.8% respectively. Retail REITs CapitaLand Mall Trust (SGX:C38U), Mapletree Commercial Trust (SGX:N2IU) and Frasers Centrepoint Trust (SGX:J69U) fell 5.9%, 5.3% and 4.3% respectively.
See S-REITs share price performance.

Sasseur REIT kept its payout ratio at 100% and did not retain cash. Its unique EMA rental model provides income stability. Fixed component income increased 3.9% y-o-y to Rmb102.4m and accounted for 80.5% of total EMA rental income in 1Q20, cushioning Sasseur REIT from the negative impact of temporary closures of Sasseur REIT’s four outlet malls over a period of 44-49 days (48-54% of the total operating days).
Portfolio occupancy remained stable at 94.8% (-1.2ppt q-o-q), demonstrating the positive partnership between the tenants and entrusted managers of each outlet mall.
Four outlet malls re-opened in mid-March. Reopening of businesses is a top priority for the Chinese government in order to get the economy back on its feet. Chongqing and Bishan outlet malls were both re-opened on 15 March while Kunming and Hefei were re-opened earlier on 11 March and 13 March respectively. Sasseur REIT will benefit as consumers return with renewed fervour.
Maintain BUY with higher target price of S$0.96, based on DDM (required rate of return: 8.5%, terminal growth: 1.5%). Sasseur REIT trades at attractive 2021 distribution yield of 9.0% and P/NAV of 0.79x.

Jonathan KOH CFA UOB Kay Hian Research | Peihao LOKE UOB Kay Hian | https://research.uobkayhian.com/ 2020-05-19

SGX Stock Analyst Report BUY MAINTAIN BUY 0.96 SAME 0.96