Following Sasseur REIT’s latest FY2020 results announcement, analysts are remaining positive on the REIT as it seems that the China-based outlet mall REIT is seeing high traction from consumers looking for a bargain.
Distribution per unit (DPU) for the 4QFY2020 period increased by 18.8% y-o-y to $1.935 cents, with income available for distribution to unitholders coming in 19.7% higher at $23.3 million.
This brings FY2020 DPU to 6.545 cents, 0.2% higher than 6.533 cents last year.
The improvement in results was mainly attributable to the rapid rebound of the Chinese economy in the second half of 2020, following China’s stringent control of Covid-19, as well as the strong operational capabilities of and proactive asset management actions taken by the entrusted manager, lower tax expenses and a strengthening RMB.
See: Sasseur REIT posts 18.8% increase in 4QFY2020 DPU to 1.935 cents
With that, Maybank Kim Eng is reiterating its “buy” recommendation on Sasseur REIT with a higher target price of $1.05 from $1.00 previously.
Analyst Chua Su Tye says, “We see strong momentum into FY2021 on improving occupancies after tenant remixing efforts, with catalysts from better-than-expected portfolio sales growth and upside from potential acquisitions, backed by a strong balance sheet and visible sponsor pipeline.”
According to the analyst, Sasseur REIT’s asset enhancement initiatives (AEI) will help to augment sales growth in FY2021. As it is, AEIs at its Hefei and Chongqing Outlets are on track to complete in 1H2021.
“The reconfiguration of retail space at Chongqing has improved efficiency and added new brands, while the conversion of the traffic driveway into a pedestrian walkway at Hefei, and the opening of an international sports brands annex should support further improvement in both shopper traffic and tenant sales,” says Chua.
Furthermore, with a strong balance sheet of low 27.9% gearing and $823 million debt headroom as at end December 2020, the analyst expects management to eye sizeable acquisitions as it crosses the third-year listing mark.
CGS-CIMB Research too has similar sentiments as it keeps its “add” recommendation on Sasseur REIT with a target price of 90.9 cents, up from 84.5 cents previously.
Analyst Lock Mun Yee likes that stock as she believes that the long-term uptrend for outlet malls is still intact in China.
Although FY2020 portfolio outlet mall sales was 22.8% lower y-o-y at RMB 3.73 billion, 4QFY2020 outlet mall sales was only 9.3% below the previous corresponding period as retail sales in China remained strong. Portfolio occupancy improved slightly q-o-q to 93.5% at end-4QFY2020, even as VIP membership increased about 7.8% q-o-q to 2.11 million.
Against this backdrop, 4QFY2020 Entrusted Management Agreement (EMA) rental income grew 6.5% q-o-q and 2.5% y-o-y, with the variable component making up 35.6% of the topline.
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Meanwhile, as part of its asset management strategy, the REIT has identified six key areas, such as elevating tenant visibility to drive sales, introducing more thematic and brand events, leveraging on all media, growing VIP memberships, undertaking frequent tenant mix reviews and looking for synergies in operations.
To this end, it plans to merge the operations of both Chongqing and Bishan outlet malls to drive economies of scale and have more efficient inventory management. AEI at Chongqing Outlet Mall has delivered improvement in 15,000 sq m of extra floor area, with increased efficiencies, as well as brought in 44 new brands into the outlet.
As at 12.15pm, units in Sasseur REIT are trading at 86 cents or 0.9 times FY2021 book with a dividend yield of 8.0%.