SASSEUR REIT – Stronger than expected sales but FX hit August 17, 2023 180

PSR Recommendation: BUY Status: Maintained
Last Close Price: 0.695 Target Price: 0.90
  • 1H23 rental income in SGD terms was within expectations at 47.7% of our estimates (S$62.6m, -1.4% YoY, +8% YoY in RMB), representing a S$0.9m YoY decrease due to the weakening RMB against the S$ by 8.7%, as compared to 1H22.
  • Outlet sales in RMB were at 50.9% of our estimations (RMB 2254.1m, +20.5% YoY). The variable component income surged by 20.8% YoY, driven by pent-up consumer demand but offset by depreciation in RMB and higher finance costs.
  • The 1H2023 DPU was within expectations at 50.6% (3.322 cents, – 2.6% YoY). SASSR retained 6.7% of distributable income mainly for the repayment of onshore RMB loans.
  • We reiterate our BUY recommendation with an unchanged DDM TP of S$0.9. FY23e – FY24e DPU forecasts have been lowered 1.5% – 1% after factoring in a stronger-than- expected depreciation of RMB against SGD.


The Positives


+ 1H23 outlet sales up 20.5% (RMB2.5Bn) and reached all-time high since listing. Performance was better than expected as Q2 is usually muted due to seasonality. Hefei outlet saw a 50.2% surge in sales YoY as Shanghai’s COVID lockdown imposed a negative impact in 1H22. Sales of Chongqing Liangjiang increased 20.3% YoY. The trend is expected to continue and deliver a stronger 2H23 performance since the Mega Anniversary Sales is slated in 3Q and festival sales in 4Q.

+ The portfolio occupancy achieved a record high of 97.2% (+0.6% YoY). Chongqing Liangjiang reached 100% occupancy, while the other 3 outlets remained stable above 95%. SASSR is actively replacing non-performing tenants and introducing new F&B offerings, capitalising on Kunming city’s recovery in F&B sales (+12.3% YoY sales growth) in 1H23. The newly signed tenants, KFC and Erlanggang Chongqing Hotpot, are based 100% on sales turnover. Chongqing Bishan Outlet’s sales growth of 8.2% YoY was disrupted by rebalancing of trade mix. Constraints expected to be resolved in 3Q23.


The Negatives

Depreciation of RMB and raising offshore interest rate were the main headwinds. Renminbi weakened by 8.7% YoY against Singapore dollar. SASSR has been hedging its revenue for 3-6 months and realised exchange gain of S$1.3m. Additionally, higher finance costs (+0.9% YoY to 5.8%, S$2.7m) due to higher interest rates on the offshore loans also added pressure to the bottom line. Offshore loans accounts for 46.4% of the total borrowing and 77% is hedged in fixed rate. We expect Singapore dollar to stay strong against RMB in 2H23 and offshore loan continues to rise.

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Liu Miaomiao
Liu Miaomiao

Miaomiao mainly covers the Singapore REITs sector and graduated from Singapore Management University with a Bachelor’s degree in Business Management.

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