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