SASSEUR REIT (SGX:CRPU)
Sasseur REIT - Recovery Underway
2Q20 in line, maintain BUY
- Sasseur REIT (SGX:CRPU)’s DPU recovered strongly in 2Q20 at +13.3% q-o-q, driven by a 10.8% q-o-q increase in its EMA rental income. The results were in line with ours and street’s estimates. We expect sales growth to gain traction in the seasonally-stronger 2H against improving occupancies, and supported by its Sep-anniversary sales events.
- We see catalysts from better-than-expected portfolio sales and contributions from potential acquisitions, backed by a visible pipeline and SGD387m debt headroom.
- We maintain our forecasts and DDM-based SGD0.95 Target Price (COE: 9.7%, LTG: 3.0%). BUY.
Portfolio sales up 56.3% q-o-q
- Portfolio sales fell 18.6% y-o-y but jumped 56.3% q-o-q after the operational disruptions in 1Q20, with a 7-week closure of its four malls following the COVID-19 outbreak. Portfolio occupancy dipped q-o-q from 94.6% to 93.6% with weaker occupancy at Bishan (down from 86.5% to 84.2%) due to ongoing tenant mix adjustments, which should trend back to 90% in 3Q20.
- Consumption remains strong; management shared that while purchases at its outlets have fallen from RMB800-1,000 per item to RMB600-700 post-reopening, shopper transactions have actually risen.
AEIs at Chongqing and Hefei set to lift yields
- AEIs planned for its Hefei and Chongqing Outlets are underway, and on track to complete in 1Q21 and 2Q21 respectively. Chongqing’s efficiency is expected to improve following a reconfiguration of its retail units and floor plates. At Hefei, the conversion of its traffic driveway into a pedestrian walkway and the higher concentration of international sports brands should help lift both shopper traffic and tenant sales.
- Fashion, sports and international brands were 56.3% of its NLA and 76.9% of revenue contributions as of end-Jun 2020 and are expected to grow.
Eyeing DPU upside from deals
- Sasseur REIT's balance sheet is sound at 28.1% leverage (was 28.5% at end-Mar 2020) with SGD387m debt headroom as of end-Jun 2020. We expect it to eye sizeable acquisitions, backed by a visible medium-term pipeline from its sponsor’s growing property portfolio - two ROFR assets and nine others that could boost its GFA by 4x.
- Management is likely eyeing deals beyond China, as third-party opportunities arise post-COVID outbreak.
- See Sasseur REIT Share Price; Sasseur REIT Target Price; Sasseur REIT Analyst Reports; Sasseur REIT Dividend History; Sasseur REIT Announcements; Sasseur REIT Latest News.
Chua Su Tye
Maybank Kim Eng Research
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https://www.maybank-ke.com.sg/
2020-08-14
SGX Stock
Analyst Report
0.950
SAME
0.950
