DASIN RETAIL TRUST (SGX:CEDU)
Dasin Retail Trust - Loan Extension And New Strategic Partner
- Dasin Retail Trust (SGX:CEDU)'s extension of S$516.7mn loan repayment to 19 December 2021 a small reprieve. Could help halt 32% slide in year-to-date share price. Refinancing of loans on longer terms required to return confidence to unitholders.
- Strategic partnership with ARA terminated in favour of China-focused Sino-Ocean. Sale and purchase agreement between Mr Zhang and Sino-Ocean’s entity, New Harvest, will allow New Harvest to acquire 70% of the Trustee-Manager. Call option by Mr Zhang to Sino-Ocean could increase Sino-Ocean’s stake from 6.36% to 26%.
- Maintain ACCUMULATE on Dasin Retail Trust and DDM target price (COE 8.12%) lowered from S$0.82 to S$0.78. FY21e/22e DPUs forecast cut by 14.8%/5%/7% for higher borrowing costs. Current price implies yields of 7.4/8.2%.
Dasin Retail Trust - Recent Events
- 31 Dec 2020:
- S$516.7mn (55%) of loans due in the next 12 months, resulting in negative net working capital of S$406.7mn.
- 20 Jan 2021:
- 6-month extension of loan facility (~S$430.0mn) to 20 July 2021.
- 14 Apr 2021:
- Audit Opinion: Unqualified Opnion with emphasis on matter in respect of material uncertainty related to the ability of the Trust and its subsidiaries to refinance their existing borrowings.
- 21 Apr 2021:
- Entry into non-binding MOU: Strategic partnership with ARA Asset Management. ARA's investment vehicles to purchase 50% of Trustee Manager and 5% of outstanding share capital from Mr Zhang Zhencheng, Chairman and controlling shareholder of Trustee-Manager and Aqua Wealth.
- 28 Apr 2021:
- Response to SGX queries on ability to continue as a going concern due to negative working capital position. The re-classification of long term borrowings to short term borrowings resulted in net working capital of S$407mn. ~55% (S$517mn) of total borrowings will expire in FY21.
- 29 Apr 2021:
- Entry into sale and purchase agreement with ARA.
- 5 Jul 2021:
- Termination of sale and purchase agreement with ARA and entry into non-binding MOU with Sino-Ocean Capital. Sino-Ocean Capital currently holds approximately 6.36% of the total issued units in the Trust (via its affiliate Glory Class Ventures Limited. Sino-Ocean to acquire 70% of Trustee-Manager and units in Dasin from Aqua Wealth so as to increase its stake in the Trust to no less than 25% of the outstanding share capital.
- 15 Jul 2021:
- Entry into sale and purchase agreement between Mr Zhang and Sino-Ocean Capital and granting of call option. New Harvest (affiliate of Sino-Ocean) will acquire 70% of Trustee-Manger from Mr Zhang and will hold a call option to acquire Dasin units from Aqua Wealth to increase Sino-Ocean's stake in the Trust to no more than 26%.
- 20 Jul 2021:
- Extension of loan facilities (S$516.7mn) to 19 December 2021.
- See Dasin Retail Trust's announcements.
What do we think?
Ditching ARA strategic partnership for Sino-Ocean
- While ARA is a globally renowned real-estate name, a partnership with China-focused Sino-Ocean does have merits like possible synergies in real estate management. Under a recent sales and purchase agreement, the Chairman and controlling shareholder of the Trustee-Manager and Aqua Wealth with a 53% stake in Dasin Retail Trust will sell 70% of the Trustee-Manager to New Harvest, an affiliate of Sino-Ocean Capital.
- Sino-Ocean Capital acquired 49,700,900 units of Dasin Retail Trust on 30 September 2019 via its affiliate, Glory Class Ventures Limited. This represents 6.36% of the trust’s current outstanding units. Aqua Wealth has also granted a call option with a 1-year validity to New Harvest, allowing it to acquire up to 19.54% of Dasin Retail Trust. Exercise of the option would bring Sino-Ocean’s stake to no more than 26% of Dasin Retail Trust’s total outstanding units. The sale of the 70% stake in the Trustee- Manager is expected to be completed in August 2021.
Background of Sino-Ocean Group
- Sino-Ocean Capital is a wholly-owned subsidiary of Sino-Ocean Group (3377 HK). Sino-Ocean Group is one of the top 100 property groups in China, backed by two insurance heavyweights, China Life Insurance Company Limited (2628 HK/601628 CH) and Dajia Life Insurance Company Limited. Both hold 29.59% stakes in the group.
- Sino-Ocean Group is a constituent of the Hang Seng Composite Index, with Baa3 and BBB- ratings assigned by Moody’s and Fitch respectively.
- Sino-Ocean Group’s core businesses are residential property development, investment property development and operations, property services and whole industrial chain construction services, real-estate financing, senior living services, logistics properties and Internet data centres.
Dasin Retail Trust - Outlook
- Earlier, loan refinancing might have been hampered by potential changes in the Trustee-Manager’s ownership, which would likely have warranted a reset of Dasin Retail Trust’s credit review process. With Sino-Ocean now holding a 70% interest in the Trustee-Manager and a potentially higher stake in Dasin Retail Trust, Sino-Ocean could support Dasin Retail Trust by extending inter-company loans or a ROFR pipeline.
- Outlook for Dasin Retail Trust appears more positive, although we await confirmation from key events such as the refinancing of loans maturing on 19 December 2021 and Sino-Ocean’s exercise of share options.
Maintain ACCUMULATE and DDM Target price of S$0.82
- Maintain ACCUMULATE rating on Dasin Retail Trust and DDM target price (COE 8.12%) lowered from S$0.82 to S$0.78. FY21e/22e DPUs cut by 14.8%/5%/7% for higher borrowing costs.
- Current Dasin Retail Trust share price implies yields of 7.4/8.2%. Refinancing of loans on longer loan terms would be required to return confidence to unitholders, in our view.
- See
- Key risks: Borrowings are secured against its properties. As such, if Dasin Retail Trust is unable to refinance or extend its loans, its banks can seize its assets and liquidate them to get back their loans.
- In the sector, we prefer Frasers Centrepoint Trust (SGX:J69U).
Phillip Research Team
Phillip Securities Research
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https://www.stocksbnb.com/
2021-07-26
SGX Stock
Analyst Report
0.78
DOWN
0.820
