SASSEUR REIT (SGX:CRPU)
Sasseur REIT - Easing China Headwinds
Strong sales recovery in 2H22, BUY
- Sasseur REIT (SGX:CRPU)’s 1H22 DPU rose 1.1% y-o-y, underpinned by a 1.6% y-o-y rise in entrusted management agreement (EMA) rental income. While sales weakened in 2Q22, occupancies were resilient from AEIs and active leasing.
- We expect sales momentum to gain pace with June’s recovery, and to strengthen into the seasonally stronger 2H22.
- Sasseur REIT's results were in line with our and consensus estimates and we maintain our forecasts and S$1.08 DDM-based target price (COE: 9.8%, LTG: 3.0%).
Subdued sales in 2Q22, with recovery in June
- Portfolio sales fell 13% y-o-y in 2Q22 with slower shopper traffic from COVID-induced movement restrictions, and dipped 29% q-o-q due to seasonality. Sales were lower except at Chongqing Bishan (which improved 2.2% y-o-y), while they declined by a larger 18-26% y-o-y in Kunming and Hefei.
- Contribution from fashion, sports and international brands remains high at 80% of gross rental income, while new lifestyle segment tenancies should help lift footfall. We see strong sales improvement in 2H22, with an anticipated boost from anniversary events in Sep, and as customer spend rises into the fall/winter months.
Occupancy at pre-COVID levels post-AEIs and leasing
- Sasseur REIT's portfolio occupancy rose to 96.0% in 2Q22 (from 95.4% in 1Q22), led by improvements at Chongqing Bishan (from 85.7% to 89.3%) post-AEI, and Hefei (96.1% to 96.5%) on the back of active leasing, while the Chongqing Liangjiang Outlet stayed fully occupied.
- Sasseur REIT's WALE remains tight at 2.5 years by NLA (1 year by gross revenue), and we see low leasing risk, with expiring leases for FY22 having been reduced to ~49% (from ~64% in 1Q22), and of which ~93% have already been pre-committed.
Gearing low, prepping balance sheet for deals
- Sasseur REIT's AUM dipped 1.9% h-o-h to S$1.8b from RMB depreciation, while gearing at 26.5% (vs 26.2% at end-Mar 2022), is lowest among peers, with S$943m in debt headroom (at 50% limit) to support deals. While opportunities are supported by its sponsor’s 13 pipeline malls, its CEO is eyeing growth from its stabilised ROFR asset in Xi’an.
- Refinancing options to de-risk its 0.7-year debt maturity profile are underway and are expected to be finalised by year-end.
- See
- We see catalysts from better-than-expected sales growth, and DPU upside from potential acquisitions, backed by a strong balance sheet and visible sponsor pipeline. Maintain BUY recommendation on Sasseur REIT.
Chua Su Tye
Maybank Research
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https://www.maybank-ke.com.sg/
2022-08-12
SGX Stock
Analyst Report
1.08
DOWN
1.100
