Sasseur REIT (SGX: CRPU)'s Outlet Malls Has Enjoyed Four-Fold Jump In Sales



Sasseur REIT (SGX: CRPU) has recently announced its first-quarter 2020 financial results. It is currently trading at 7.3% yield based on the last traded share price of $0.73 on 19 May.


Key Highlights:


  • Distribution per unit (DPU) and Dividend Yield (7.3%)

  • Price to book ratio (0.79)

  • Gearing (28.5%)

  • Interest coverage ratio (4.7x)

  • Portfolio occupancy rate (94.8%)

  • Growth catalyst


Background of Sasseur REIT


Sasseur REIT is the first outlet mall REIT listed in Singapore. The REIT owns and manages a portfolio of four retail outlet malls in China, which offers investors the opportunity to invest in the country's fast-growing retail outlet mall sector. The REIT was listed on Singapore Stock Exchange since 2018.



1. Distribution per unit and dividend yield


Sasseur REIT's Q1 DPU was down by 19.4% year-on-year. This was mainly due to the closure of all the four outlet malls during the Covid-19 period in China. While the retail sales were down by 55.7%, its rental income only fell 18.2% with the support from its EMA-backed fixed rent. Based on its latest price, the REIT is currently trading at about 7.3% dividend yield. Its average yield in the past two years was about 7.5%



2. Price to book ratio


As compared to its IPO valuation, Sasseur REIT's net asset value (NAV) has increased by 15.7%. This helps to improve its price to book ratio to 0.79.



3. Gearing


Portfolio leverage remains conservative at 28.5%, which gives Sasseur REIT an extra $379m of debt headroom for future growth and acquisitions. Its sponsor manages a portfolio of 11 properties, which provides a healthy pipeline of assets to the REIT.


4. Interest coverage ratio


The REIT has an interest coverage ratio of 4.8 times, which is slightly above our preference of 4 times. Besides, the REIT maintains an overall interest cost of 4.41%. On thing to take note is that the REIT has S$133m (about 25% of its total debt) up for refinancing in 2021.


5. Portfolio occupancy rate


Portfolio occupancy remains high at 94.8% despite the Covid-19 pandemic. Its ChongQing outlet mall maintains a full occupancy rate. However, half of its tenants by net leasable area is up for renewal this year.


Sasseur REIT's Portfolio Occupancy, source: Sasseur REIT's Investor Presentation

6. Growth Catalyst


China has resumed "back-to-normal" after the lockdown since Jan. All four retail outlet malls of Sasseur REIT were reopened in March. The good news was all four malls enjoy triple-digit growth in sales on its first day as compared to the same period last year. Its annual Spring Sales which rescheduled to end-April reported a four-fold jump in first-day sales. We would potentially see a jump in rental income in the second quarter.


The REIT has planned asset enhancement initiatives for Chongqing and Hefei outlets which will commence in May to Q4. Besides healthy pipeline of assets from its sponsor, the management is also eyeing potential deals outside of China.



Summary


Sasseur REIT's share price has gone up almost 50% since its low in March. With the recent recovery of pandemic in China, we would continue to see strong results from its four outlet malls.



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