Dasin Retail Trust (Dasin) was listed on 20 January 2017 with three retail malls worth S$944.7mn. Just five months after listing, Dasin announced a yield accretive acquisition – Shiqi Metro Mall, for S$248.2mn. The current four malls in the portfolio span 243,632 sqm of net lettable area, all located in Zhongshan City, Guangdong Province, China. The Sponsor – Zhongshan Dasin Real Estate – has made available to Dasin a ROFR pipeline of 19 properties (10 completed properties and nine under development, across four cities – Zhongshan, Foshan, Zhuhai, Macau). 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.
There are two relevant risk factors for Dasin:
We initiate Dasin with a BUY. Our target price is S$0.98, implying 26.5% total upside together with a dividend yield of 10.2% (FY17e).
THE BUSINESS TRUST
Dasin Retail Trust (Dasin) is a business trust listed on the SGX Mainboard. It is primarily invested in retail assets in China. Dasin listed on 20 January 2017 with three malls and subsequently acquired a fourth mall just five months after listing. All the four malls are in Zhongshan.
The Sponsor* of Dasin is Zhongshan Dasin Real Estate Co. Ltd, which is a leading developer of residential and retail properties in Zhongshan and presently owns a 60.1% stake in Dasin. The owners of Zhongshan Dasin Real Estate are Mr. Zhang Zhongming, Mr. Zhang Kaicheng and Mr. Zhang Jiucheng.
*Other businesses of the Sponsor include restaurants (Xin Xuan Tea House, Xin Xuan Restaurant, Dasin Seafood City), hotels (Dasin Convention Centre Hotel, Dasin Holiday Inn Hotel, Dasin Crowne Plaza), technology (Zhongshan Dasin Pass Intelligent Technology), education (Dasin Shiqi Central Primary School), finance (Zhongshan Dasin Microfinance).
Dasin currently holds four malls in its portfolio, valued at RMB7,469 (S$1,532m):
Summary of the four malls
LEASE STRUCTURE OF MALLS
a. Occupancy: All four malls registered 100% occupancy as at 30 September 2017.
Figure 6: Strong occupancy levels since IPO
b. Lease types: Dasin’s portfolio of lease structure largely comprises of higher of base rent or turnover rent (28% by GRI) and fixed rent with built-in escalation (57% by GRI). This structure will provide predictability of the organic growth in the portfolio. In our models, we are estimating a 5-9% annual escalation rate for the leases with built-in escalation and a 5-40% renewal rate for the leases due to expire in each respective year.
Figure 7 (LHS): Dasin’s leases have a small fixed rent contribution
Figure 8 (RHS): Dasin E-Colour is the only mall without a “Higher of Base Rent or Turnover Rent” component
Figure 9: Upside from ~23% leases expiring in FY2018
The report is produced by Phillip Securities Research under the ‘SGX StockFacts Research Programme’ (administered by SGX) and has received monetary compensation for the production of the report from the entity mentioned in the report.