Sasseur REIT - Maybank Kim Eng 2020-11-15: China Retail Recovery Play


Sasseur REIT - China Retail Recovery Play

Strong 3Q20, raised DPUs and target price

  • We raised Sasseur REIT (SGX:CRPU)'s FY20-21 dividend forecast by 3-5%, on the back of better-than-expected 3Q20 performance. (Estimated dividend yield - FY20: 7.7%, FY21: 8.0%)
  • 9M20 is at 77% of our full-year estimate, driven by a strong rebound in shopper traffic and a 33% q-o-q jump in portfolio sales. We see the strong sales momentum extending into 4Q20 and FY21 due to improving occupancies as a result of its AEIs, and catalysts from better-than-expected portfolio sales growth and contributions from potential acquisitions, backed by a strong balance sheet and visible pipeline.
  • Our new DDM-based S$1.00 target price for Sasseur REIT (COE: 9.4%, LTG: 3.0%) implies 34% total return. BUY.

Portfolio sales up 33% q-o-q

  • Portfolio sales increased 33% q-o-q in 3Q20 after recovering 56% q-o-q in 2Q20, driven by stronger shopper traffic and its Sep anniversary sales events. It has continued to gain traction on VIP member count, adding 23.4% in 9M20.
  • Sales at Sasseur REIT's Chongqing outlet rose 50% q-o-q and 2.4% y-o-y, following the phased AEI works, and new brands added (Versace, Armani Exchange).
  • Sasseur REIT's portfolio occupancy was stable at 93.1% in 3Q (93.6% in 2Q) although it fell at Bishan from 84.2% in 2Q to 81.5% in 3Q due to on-going adjustments in its tenant mix, which should improve in 4Q20.

AEIs on track, set to lift sales further in FY21

  • AEIs at Sasseur REIT's outlets in Hefei and Chongqing are on track for completion in 1Q21 and 2Q21 respectively. Reconfiguration of retail units and floor plates at the Chongqing outlet to improve efficiency, and conversion of the driveway into a pedestrian walkway at the Hefei outlet should help drive improvement in both shopper traffic and tenant sales.
  • Fashion, sports and international brands, which accounted for 57.9% of its NLA as of end-Sep 2020 (up from 56.3% in 2Q20) and 79.1% of revenue contributions (vs 76.9%), are expected to rise.

Strong balance sheet, eyeing big deals

Chua Su Tye Maybank Kim Eng Research | 2020-11-15
SGX Stock Analyst Report BUY MAINTAIN BUY 1.00 UP 0.950