Dasin Retail Trust - Phillip Securities 2021-05-20: Tracking Our Recovery


Dasin Retail Trust - Tracking Our Recovery

  • Dasin Retail Trust (SGX:CEDU)'s 1Q21 revenue in line, at 24.7% of our FY21e estimate. Revenue was lifted by a recovery in variable rents, an absence of rebates and contributions from Shunde Metro Mall and Tanbei Metro Mall, both acquired in July 2020. Same-store revenue now at 94% of 1Q19 levels.
  • Occupancy dipped q-o-q from 96.4% to 96.1% following non-renewals. Lower leases were signed in the quarter due to backend-loaded FY21 expiries. Lease terms unchanged.
  • Maintain ACCUMULATE on Dasin Retail Trust with DDM target price (COE 8.12%) of S$0.82. No change in estimates. Dasin Retail Trust is tracking our recovery forecasts. Current Dasin Retail Trust share price implies dividend yields of 6.7%.

The Positive

1Q21 revenue grew 87.4% y-o-y.

  • About 51.0ppts of the growth stemmed from a recovery in variable rents and an absence of rebates. The remaining 36.4ppts were contributed by Shunde Metro Mall and Tanbei Metro Mall, which were acquired in July 2020. China’s 1Q21 total retail sales grew by 33.9% y-o-y. The recovery, though, was uneven among the trade sectors. 1Q21 same-store revenue was at 94% of 1Q19 pre-pandemic levels. This was a shade below 4Q20 revenue, which had recovered to 95.8% of 4Q19 levels.

The Negatives

Occupancy dipped q-o-q from 96.4% to 96.1%.

  • This was mainly attributed to a 1.7ppt decline at Shunde Metro Mall and 1.0ppt drop at Ocean Metro Mall. Shunde’s occupancy was lower following an 800 sq m non-renewal from a tenant in the entertainment trade. This was filled in April 2021.
  • Occupancy at Tanbei Metro Mall fell 2.7ppts following a 240 sq m non-renewal by a tenant in the education trade. However, this mall is small, accounting for only 1.4% of revenue.
  • Occupancy fluctuated between -0.1ppt and +0.5ppt for the remaining four malls.

Lower leasing volume in 1Q21

  • Lower leasing volume in 1Q21, as FY21 expiries are backend-loaded. Leasing terms were largely unchanged, with tenants signing 1-2-year terms. Demand from F&B tenants had normalised. However, demand from fashion and services remained weak.
  • Signing rents were flat y-o-y. Reversions were not disclosed, though we estimate negative single-digit reversions from pre-pandemic levels, in line with market rental trends.


Significant 31.1% of leases by GRI up for renewal in FY21

  • Half of the leases up for renewal are attributable to two tenants: a furniture tenant at Ocean Metro Mall which has indicated interest to renew; and a 1-year lease for the Superior City Department Store space vacated at Ocean Metro Mall. The 1-year lease will end in November 2021. A steady recovery in consumer spending is encouraging and may return confidence to tenants who have been delaying their renewal decisions.

Strategic partnership with ARA Asset Management

  • ARA Asset Management has entered into a non-binding MOU with Mr Zhang Zhencheng, Chairman and controlling shareholder of Dasin’s trustee-manager and Aqua Wealth Holdings Limited, the controlling unitholder of Dasin. Through its affiliates, ARA Asset Management will acquire:
    1. a 50% stake in the trustee-manager from Mr Zhang; and
    2. 5.0% of the total issued units from Aqua Wealth via two 2.5% tranches.
  • ARA Asset Management manages S$116bn of assets globally. Potential benefits of the partnership include synergies from complementary resources and capabilities within the Greater Bay Area.

Near-term acquisitions likely from sponsor

  • Dasin Retail Trust has an ROFR pipeline of 15 properties, six still under construction. Given its shorter trading history, investors have higher return expectations. Dasin Retail Trust will need to rely on its sponsor’s support to make accretive acquisitions.
  • Since listing, Dasin Retail Trust has acquired four malls from its sponsor at an average 25% discount to valuations. The trust will focus on acquisitions from its sponsor in the near term, before exploring any assets from ARA.

Leverage to transformation of Greater Bay Area

  • China intends to develop its Greater Bay Area into a booming financial hub under its 13th 5-Year Plan in December 2016. Up-and-coming financial exchanges will be located in Guangzhou (for carbon-emission futures trading) and Macau (a NASDAQ-like market for start-ups). With this transformation, the population in the Greater Bay Area is forecast to grow by 43% over the next 15 years, to 100mn.
  • All 7 of Dasin Retail Trust’s malls are located in the Bay: 5 in Zhongshan, 1 in Foshan and the last in Zhuhai. All are within a 1-hour traffic radius of Greater Bay Area cities. As Tier-2 cities, they provide affordable housing to surrounding Tier-1 cities like Guangzhou and Shenzhen. Zhongshan is primed to benefit from its location at the mid-point of the Bay as well as the Shenzhen-Zhongshan bridge which is under construction. When completed in 2024, the bridge will slash travelling time between the two cities from one hour and 15 minutes to 30 minutes.

Maintain ACCUMULATE and DDM Target Price of S$0.82

Phillip Research Team Phillip Securities Research | https://www.stocksbnb.com/ 2021-05-20