SINGAPORE (Nov 13): Soochow CSSD Capital Markets (SCCM) is initiating coverage on Dasin Retail Trust and a target price of 97 cents, which implies a total return of 21.6% and FY19E yield of 8.3%.
The trust is trading at 0.61 times price-to-book according to the research house’s estimates, as at the Nov 8 close of 86 cents per unit.
In a report last Friday, SCCM highlights Dasin as Singapore’s sole listed business trust with direct retail exposure to the Guangdong-HK-Macau Greater Bay Area (GBA).
This is given how the trust’s assets are located mainly in the strategic areas of Zhongshan, China, which SCCM analyst Zhao Yiyuan believes will see a boost in near-term growth from the provincial government’s plan to spend ~RMB140 billion on infrastructure over the next five years.
“Dasin’s assets are well positioned to directly benefit from the population and tourism growth from the economic development of Zhongshan and spill-over effect of economic resource redistribution following the development of the GBA,” opines Zhao.
“As Zhongshan is a Tier 3 city, it is positioned to benefit disproportionately from economic resource redistribution as it becomes increasingly connected to more developed cities such as Shenzhen and Hong Kong.”
In particular, Zhao likes Dasin for its sponsor Zhongshan Dasin Real Estate, a prominent and experienced real estate developer in Zhongshan, as well as the visible quality asset injection plans.
This is because Dasin’s sponsor holds to 20 right of first refusal (ROFR) assets across four cities, with plans to inject 1-2 assets per year into the trust.
“Dasin’s current portfolio offers steady organic growth potential, anchored by built-in rental escalations of ~4-5% pa and robust rental reversion expectations of ~10% p.a. We expect the 1-2 asset injections annually (committed by management) and the maintenance of a balancing reserve (~S$7m currently) as the key mitigating factors to concerns on distribution waivers falling off,” notes Zhao.
“We expect gross revenue and NPI to both grow at 5.5% CAGR from FY18-21E, primarily driven organic growth of the portfolio and supported by the macro- economic development of Zhongshan,” concludes the analyst.
As at 3.47pm, units in Dasin Retail Trust are trading flat at 86 cents or 0.6 times FY18E P/B.