• Revenue and NPI for FY17 were in line with our forecast. 69% YoY boost in revenue on the back of contribution of Shiqi Metro Mall, acquired in June 2017.
• Continued organic growth with expansion in baseline revenue and with all malls reporting at 100% occupancy.
• Ample debt headroom (30.7% gearing) to act on ROFR pipeline of 19 properties.
• Maintain BUY and unchanged target price of S$0.98 (Click here for our Initiation report on Dasin)

Results at a glance

The Positives

+ Organic growth captured from positive rental reversions and step-up escalations. Stripping out Shiqi Metro Mall, baseline revenue continues to expand, with a positive 12.7% rental reversion in FY2017 (33% of incremental baseline revenue) and step-up escalations from leases expired during the period (67% of incremental baseline revenue).

+ Improved occupancy from 99.2%¹ to 100%. Strong occupancy for all four malls, with an above 90% tenant retention rate. In addition, there are hardly any gaps between the lease expiry and new lease sign-ups.

¹ As at 30 June 2016

The Negatives

– Revenue in FY17 was slightly lower than expected. Particularly, the reversion rates of Ocean Metro and Dasin E-Colour were lower than our estimates. Dasin E-Colour’s revenue was compressed by the negative reversions of the ongoing recalibration of certain stall formats (atrium, advertising). However, this measure is temporary and is part of Dasin’s ongoing asset enhancement, which will drive efficiency and productivity.

Outlook

Inorganic growth will be through its ready pipeline of 19 properties. We expect continued organic growth as all malls are reporting at 100% occupancy. Zhongshan’s economy continues to be robust, with GDP expanding 7.73% in 2017 and exports rebounding sharply in 2017 with a YoY growth of 13.6%. DPU for FY17 was lower than our forecast primarily due to realised exchange losses. While we have adjusted our revenue forecast for FY18-19 downwards by 0.6-1.2% from the change in portfolio lease structure, this has been offset by the uptick in our forecast NPI margins due to higher efficiencies attained by the Group. Consequently, our DPU for FY18 has been raised 3% to 9.79 cents.

Maintain BUY with unchanged target price of S$0.98

Operationally we expect Dasin to deliver healthy organic and inorganic growth. DPU will taper gradually as the income support is removed. Nevertheless, the yields and valuations remain attractive to us. Key risks would be the fall-off of income support in FY21 and currency exposure to the RMB. We maintain our BUY rating with an unchanged target price of S$0.98.