Sasseur REIT - CGS-CIMB Research 2021-02-26: Still Going Strong


Sasseur REIT - Still Going Strong

  • Sasseur REIT's 4Q/FY20 DPU of S$0.01935/S$0.06545 were above our expectations, at 32.3%/109.3% of our FY20F forecast.
  • Active asset management strategy to continue to drive tenant sales.
  • Reiterate ADD on Sasseur REIT, with a higher DDM-based target price of S$0.909.

Sasseur REIT's 4Q/FY20 results highlights

  • Sasseur REIT (SGX:CRPU) reported a 4Q20 entrusted manager agreement (EMA) rental income of S$34.7m (+23% y-o-y), while distributable income came in at S$23.3m (+19.1% y-o-y), translating into a DPU of S$0.01935 (+18.8% y-o-y). The better performance was due to the stronger RMB, interest cost savings, and a slightly lower effective tax rate (excluding deferred taxes).
  • Sasseur REIT's FY20 DPU of S$0.06545 was 0.2% higher y-o-y.

Tenant sales continue to improve q-o-q

  • Although Sasseur REIT's FY20 portfolio outlet mall sales was 22.8% lower y-o-y at RMB3.73bn, 4Q20 outlet mall sales was only 9.3% below the previous corresponding period as retail sales in China remained strong. Bishan Outlet Mall recorded a 3.9% y-o-y uptick in 4Q20 tenant sales, while the outlet malls recorded 6.4-18.4% declines in retail sales.
  • Portfolio occupancy improved slightly q-o-q to 93.5% at end-4Q20, even as VIP membership increased ~7.8% q-o-q to 2.11m. Against this backdrop, 4Q20 EMA rental income grew 6.5% q-o-q and 2.5% y-o-y, with the variable component making up 35.6% of the topline.
  • Sasseur REIT has 60.6%/10.8% of net lettable area to be renewed in FY21F/FY22F. As part of its asset management strategy, it has identified six key areas, such as elevating tenant visibility to drive sales, introducing more thematic and brand events, leveraging on all media, growing VIP memberships, undertaking frequent tenant mix reviews and looking for synergies in operations. To this end, it plans to merge the operations of both Chongqing and Bishan outlet malls to drive economies of scale and have more efficient inventory management.
  • Asset enhancement initiatives (AEIs) at Chongqing Outlet Mall has delivered improvement in 15k sq m of extra floor area, with increased efficiencies, as well as brought in 44 new brands into the outlet. The sports section of Block B at Hefei Outlet Malls has also been completed.

Cost savings from lower interest rates

  • Sasseur REIT’s aggregate leverage stood at 27.9% as at end-4Q20, with a healthy interest coverage ratio of 7.8x. The weighted average cost of debt also declined to 3.2%.
  • Debt maturity stands at 2.2 years, with the bulk due in 2023F. We believe the full impact of the lower financing would be felt in FY21F. In addition, Sasseur REIT is well placed to tap inorganic growth given its robust balance sheet.

Reiterate ADD rating

LOCK Mun Yee CGS-CIMB Research | EING Kar Mei CFA CGS-CIMB Research | 2021-02-26
SGX Stock Analyst Report ADD MAINTAIN ADD 0.909 UP 0.845