SINGAPORE (Jan 16): Phillip Capital is starting coverage on Dasin Retail Trust with a "buy" and target price of 98 cents with a forecast dividend of 9.5 cents.
Phillip expects organic rental growth of 16% CAGR for the next two years for Dasin with growth coming from across almost all lease types, with almost 90% of leases having built-in fixed escalation in rent or linked to tenant turnover.
Listed on Jan 20, Dasin started with three retail malls worth $944.7 million. Five months after listing, Dasin announced a yield accretive acquisition – Shiqi Metro Mall, for $248.2 million.
The current four malls in the portfolio span 243,632 sqm of net lettable area, all located in Zhongshan city, Guangdong province, China.
Over the past 10 years, retail sales in Zhongshan have been growing at a CAGR of almost 14%. This is on the back of robust GDP per capita gains of 9.0%.
Sponsor Zhongshan Dasin Real Estate has made available to Dasin a Right-Of-First-Refusal pipeline of 19 properties.
These consist of 10 completed properties and nine under development, across four cities -- Zhongshan, Foshan, Zhuhai and Macau.
The pipeline of properties could see Dasin’s GFA potentially expanding by 3.9 times.
In the near term, Dasin could exercise an option to acquire Doumen Metro Mall in Zhuhai.
Based on net lettable area, this could become Dasin’s largest acquisition.
Dasin’s gearing at 31.4% provides it with a debt headroom of $209 million for acquisitions, assuming a gearing limit of 45%.
Dasin’s distribution policy entitles unitholders to receive 100% of distributable income to unitholders for FY17 and FY18, followed by 90% of distributable income to unitholders in respect of FY19 and onwards.
Investors, however, should look out for two risks.
The sponsor has waived their entitlement to dividends for five years from FY17 to FY21. This waiver begins in FY17, where 54.7% of total units will not be entitled to dividends.
"The final year of entitlements will be in FY21. FY21 will witness a material change in waived entitlements, from 34.6% in FY20 to 14.8% in FY21," says Phillip.
The other is currency exposure to RMB.
"There is minimal hedging on the currency side and investors are essentially exposed to RMB fluctuations," adds Phillip.
Units is Dasin are trading at 85 cents, giving it an FY18 distribution yield of 11.2%.
