Sasseur REIT Review @ 31 August 2023

Basic Profile & Key Statistics

• Main Sector(s): Retail
• Country(s) with Assets: China
• No. of Properties (exclude associate/fund): 4

Key Indicators

Performance Highlight

EMA rental income in RMB increased YoY, however, in terms of SGD, both EMA rental income and distributable income have declined slightly due to a weaker exchange of RMB against SGD. DPU has declined mainly due to the higher amount retained. 

Sales

Sales for all 4 outlets have improved YoY due to the re-opening of the economy in December 2022.

Asset Enhancement Initiative

The AEI for Kunming Outlet which aims to revitalize low-traffic zone and improve occupancy through 2 new F&B brands is ongoing. KFC is expected to open at the end of August while Erlanggang Chongqing Hotpot has opened on 5 August.

Related Parties Shareholding

• REIT Sponsor's Shareholding: Above median by 20% or more
• REIT Manager's Shareholding: Above median by 20% or more
• Directors of REIT Manager's Shareholding: Above median by 20% or more

Lease Profile

• Committed Occupancy: ± 5% from median
• Income in SGD/Major Currencies: All income is received in RMB
• WALE: Below median by 20% or more
• Highest Lease Expiry within 5 Years: Above median by 20% or more; Falls in this year
• Weighted Average Land Lease Expiry: Below median by 20% or more

Debt Profile

• Gearing Ratio: Below median by 20% or more
• Cost of Debt: Above median by 20% or more
• Fixed Rate Debt %: ± 10% from median
• Unsecured Debt %: 0%
• WADM: Above median by 20% or more
• Highest Debt Maturity within 5 Years: Above median by 20% or more; Falls in 2026
• Interest Coverage Ratio: Above median by 10% or more

Diversification Profile

• Top Geographical Contribution: ± 10% from median
• Top Property Contribution: Above median by 20% or more
• Top 5 Properties' Contribution: Above median by 20% or more
• Top Tenant Contribution: Below median by 20% or more
• Top 10 Tenants' Contribution: Below median by 20% or more

Key Financial Metrics

• Property Yield: Above median by 20% or more
• Management Fees over Distributable Operating Income: Below median by 20% or more; $9.01 distribution for every dollar paid 
• Distributable Operating Income on Capital: Above median by 20% or more
• Distributable Operating Income Margin: Above median by 20% or more
• Operating Distribution Proportion: ± 5% from median

DPU Breakdown

• TTM DPU Breakdown:
• 89% from Operation
• 11% from Fees Payable/Paid in Units
• TTM DPU = 91.1% of Distributable Income

Trends

*The interest coverage ratio for the periods 1Q 2021 and before is estimated to reflect a closer figure in accordance with the Property Funds Appendix of the Code on Collective Investment Schemes.

• Uptrend: Interest Coverage Ratio, Operating Distributable Income on Capital, Operating Distributable Income Margin
• Slight Uptrend: NAV per Unit
• Flat: DPU from Operation, Committed Occupancy
• Downtrend: Property Yield

Relative Valuation

• Dividend Yield: Average for 1y & 5y; Above +1SD for 3y
• P/NAV: Average for 1y, 3y & 5y

Author's Opinion

Favorable	Less Favorable
High REIT Sponsor's Shareholding	All income is received in RMB
High REIT Manager's Shareholding	Short WALE
High Directors of REIT Manager's Shareholding	Concentrated Lease Expiry
Low Gearing Ratio	Short Weighted Average Land Lease Expiry
Long WADM	High Cost of Debt
High Interest Coverage Ratio	0% Unsecured Debt
Low Top Tenant & Top 10 Tenants' Contributions	Concentrated Debt Maturity
High Property Yield	High Top Property & Top 5 Properties' Contributions
Competitive Management Fees	Property Yield Downtrend
High Distributable Operating Income on Capital
High Distributable Operating Income Margin
Interest Coverage Ratio Uptrend
Operating Distributable Income on Capital Uptrend
Operating Distributable Income Margin Uptrend

EMA's rental income decreased in the current quarter compared to the previous one, primarily due to reduced variable components influenced by the seasonal retail patterns (1Q 2023 sales boosted by larger-scale sales events such as Chinese New Year’s promotions). As a result, distributable income has declined. In terms of debt, there's no refinancing requirement for the current year, while 12.9% of the debt is set to mature in the next year. With a moderate proportion of fixed-rate debt and a slight reduction in the 5-year Loan Prime Rate, finance costs for Sasseur REIT should remain stable.

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*Disclaimer: The information presented on this blog is for educational and informational purposes only. The materials, including research and opinions, are based solely on my findings and should not be considered professional financial advice or a definitive statement of fact. I cannot guarantee the accuracy, completeness, or reliability of the information provided. I shall not be held liable for any errors, omissions, or losses that may occur as a result of using the information presented on this blog. It should be noted that the information presented on this blog does not constitute a buy, sell, or hold recommendation for any security. It is crucial to conduct your own thorough research and due diligence before making any investment decisions.