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Tuesday, September 01, 2020

Sasseur REIT Analysis @ 1 September 2020

Basic Profile & Key Statistics

Sasseur REIT (Sasseur) invests in retail properties in China, it currently owns 4 outlet malls.


Lease Profile

Occupancy is healthy at 93.6% and income is received in RMB. WALE is short at 0.8 years. The highest lease expiry of 62.4% falls in this year. Weighted average land lease expiry is short at 30.35 years, which is common for China properties.


Debt Profile

Gearing ratio is low at 28.1%.  Cost of debt is high at 4.2% with 0% unsecured debt. Fixed-rate debt % is low at 12.9% which is favorable in current low interest environment. Interest cover ratio is high at 5 times. WADE is short at 2.23 years where the highest debt maturity of 72% falls in the year 2023. 


Diversification Profile

Top geographical contribution is moderate at 53%. Top property contribution is high at 43.9%. Top tenant and top 10 tenants are low at 7.5% and 18%.


Key Financial Metrics

Property yield, distribution on capital and distribution margin are high at 7.2%, 4.7% and 63.5%. Mangement fee is competitive in which unitholders receive S$ 10 distribution for every dollar paid. 


Related Parties Shareholding

As compared to SREITs median, sponsor and manager and directors of REIT manager are holding higher stake.


Trend

The high DPU and distribution margin in 4Q 2018 is due to one-off adjustment for statutory reserve and lower income tax expense. Ignoring these one-off items, DPU and distribution margin is on slight uptrend before COVID strike. NAV per unit is on uptrend.


Relative Valuation

i) Average Dividend Yield  - Average yield at 8.57%, apply the past 4 quarters DPU of 6.115 cents will get S$ 0.715. 

ii) Average Price/NAV - Average value is at 0.87, apply the latest NAV of S$ 0.905 will get S$ 0.77.


Author's Opinion

FavorableLess Favorable
Gearing RatioIncome received in RMB
Interest Cover RatioWALE
Top Tenant & Top 10 Tenants WeightageConcentrated Lease Expiry
Property YieldWeighted Average Land Lease Expiry
Management FeeCost of Debt
Distribution on CapitalUnsecured Debt
Distribution MarginWADE
NAV per Unit UptrendConcentrated Debt Maturity
 Top Property Weightage

Sasseur performance affected slightly by COVID where its 1H DPU declined 12.8% yoy. Both AEI for Chongqing and Hefei properties are expected to completed by 2Q 2021 and 1Q 2021 respectively, which both are expected to increase shoppers' traffic. In the annual report, Sasseur mentioned it intentionally opts for a shorter lease to be able to replace under-performing brands with brands that are better suited to consumers. Sasseur can also renew leases at higher rates for brands that perform well. This way working well during good time, but whether workable in the current challenging situation? We shall wait for the upcoming 3Q and 4Q results to review it.


For more information, you could refer:

SREITs Dashboard - Detailed information on individual Singapore REIT as well as summary

SREITs Data - Overview of Singapore REIT

REIT Analysis - List of previous REIT analysis posts

REIT Investing Community - Facebook Group where members share and discuss REIT topic


*Disclaimer: Materials in this blog are based on my research and opinion which I don't guarantee the accuracy, completeness, and reliability. It should not be taken as financial advice or statement of fact. I shall not be held liable for errors, omissions as well as loss or damage as a result of the use of the material in this blog. Under no circumstances does the information presented on this blog represent a buy, sell, or hold recommendation on any security, please always do your own due diligence before any decision is made.

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