SINGAPORE (Feb 20): Maybank Kim Eng is maintaining its “buy” call on Sasseur REIT while leaving its forecasts and target price of 90 cents unchanged.
This comes after the REIT manager on Monday posted a FY18 distribution per unit (DPU) of 1.999 cents, 12.6% higher than forecast on the back of strong performance across all four malls in its portfolio as well as lower-than-expected operating expenses.
In a Tuesday report, analyst Chua Su Tye highlights Sasseur REIT as the best play on China’s retail ‘premiumisation’ theme, as he believes its outlet malls look set to capture a larger wallet share of China’s brand-conscious, yet price-sensitive ‘aspirational consumers’ – i.e. those who seek both sustainability and consumption.
Highlighting portfolio occupancy growth as well as stronger-than-projected 4Q and FY18 EMA rental income over the REIT’s latest financial year, Chua sees strong momentum for further growth over 2019.
He expects this to be supported by a visible shopper event calendar, and believes the REIT remains on track to close its 22% DPU gap between its underlying rental income and that promised by its risk-absorbing entrusted manager arrangements (EMAs)
“With downside protection from its risk-absorbing EMA structures (i.e. minimum rental guarantees), the risk to DPU lies to the upside given stronger-than-expected sales performance so far (it has sales-based leases),” says Chua.
Noting that Sasseur REIT’s sponsor Sasseur Cayman Holding expanding its property pipeline from three to seven after additions in Changsha, Lanzhou, Yangzhou and Shenzhen, the analyst says this could further add to the REIT’s medium right of first refusal (ROFR) pipeline.
“With a strengthening management track record, [Sasseur REIT’s sponsor] continues to eye opportunities to implement its ‘(1+N) x Big Data’ super outlet business model into other third-party underperforming malls,” says Chua.
Units in Sasseur REIT traded 1 cent higher at 75 cents before the midday trading break, implying a FY19F DPU yield of 8.51%.
