Sasseur REIT - Maybank Kim Eng 2021-05-12: Recovery Gains Traction


Sasseur REIT - Recovery Gains Traction

Sasseur REIT's 1Q21 DPU up 31.9% y-o-y

  • Sasseur REIT (SGX:CRPU) delivered strong 1Q21 DPU at +31.9% y-o-y, on the back of a +23.4% y-o-y in its entrusted management agreement (EMA) rental income. This was driven by a ~113% y-o-y jump in its portfolio sales, which was underpinned by stable occupancies. Sales recovery is gaining traction post-Covid, and we see strong momentum into FY21 as occupancies improve from AEIs and tenant remixing efforts, with catalysts from better-than-expected portfolio sales growth and upside from potential acquisitions, backed by a strong balance sheet and visible sponsor pipeline.
  • We maintain DPUs forecast and our DDM-based S$1.05 target price for Sasseur REIT (COE: 10.2%, LTG: 3.0%). BUY.

Portfolio sales jumped 112.6% y-o-y

  • Portfolio sales jumped 112.6% y-o-y, driven by stronger recovery post-COVID, as well as added tenant mix and operational efficiencies from its AEIs. It added 6.8% q-o-q to the VIP member count in 1Q21, versus +33.0% y-o-y for FY20.
  • Portfolio occupancy was stable at 93.5%, with the Chongqing outlet remaining fully occupied. Occupancy at the Bishan outlet should improve from 81.0% given the +114.6% y-o-y increase in sales, and from tenant mix adjustments. Merged operations for the two outlets have resulted in a renaming to Chongqing Liangjiang and Chongqing Bishan.

AEIs, expansion to support sales growth

  • The AEI at Hefei has neared completion, while a reconfiguration of retail space at Chongqing remains on track, with improved efficiency and new brands to support further improvement in both shopper traffic and tenant sales.
  • Sasseur REIT's management retained 10% of its distributable income (or S$2.4m) to fund AEIs and expansion, and we expect these could help to improve building efficiency at Bishan. Fashion, sports and international brands were stable at 60.7% of its portfolio NLA at end 1Q21 and 80.5% of revenue contributions (vs 79.3% in 4Q20) and are expected to grow.

Strong balance sheet, potential deal upside

Chua Su Tye Maybank Kim Eng Research | 2021-05-12
SGX Stock Analyst Report BUY MAINTAIN BUY 1.05 SAME 1.05