SINGAPORE (May 27): Phillip Capital is maintaining its “buy” or “accumulate” call on Dasin Retail Trust with a 91 cent price target even though its 1Q20 revenue and net property income (NPI) came in below its forecasts.

Dasin Retail Trust’s 1Q20 revenue fell 21.0% y-o-y from 1Q19 due to lower turnover rent, and $6.0 million in rental rebates offered to tenants in February and March. The delayed acquisition of Shunde and Tanbei Metro Mall, which is estimated to be completed in 3Q20, did not contribute to the earnings as expected. The trust’s distribution per unit plunged 58.3% to 0.71 cents for 1Q20, compared to 1.70 cents the year before.

“The joint acquisition of Shunde Metro Mall and Tanbei Metro Mall were approved at the EGM on 20 December 2019. We were anticipating a mid-1Q20 completion. However, the COVID-19- induced volatility in the global markets has resulted in delays in the private placement, and consequently the completion of the acquisition,” notes Phillip Capital.

“Financing of the acquisition has been adjusted in light of the depreciation of share price and weakening of the Singapore dollar against Renminbi. We think the acquisition is headed for a 3Q20 completion,” it adds.

The research house has reduced its DPU estimate for FY20 by 16.9% to 5.2 cents after factoring in the total of $7.9 million (an additional $1.9 million were granted to tenants in April) in rental rebates for FY20 and lower rental reversions.

In a report on Wednesday, Phillip’s research team says it remains positive on Dasin Retail Trust for its inorganic growth prospects with ROFR pipeline for 18 properties in four cities, which will help to mitigate the DPU gap.

The team also likes Dasin Retail Trust for its healthy portfolio metrics, which is underpinned by assets with an occupancy rate of 96.8%, and a weight average lease expiry (WALE) of 4.5 years. However, due to the shorter operating hours owing to the Covid-19 pandemic, the Trust’s turnover rent for March and April stood at 37% and 32% below 4Q19 levels. Portfolio occupancy also fell by 2.0 percentage points q-o-q to 96.8% on non-renewals and vacant space due to ongoing asset enhancement initiatives (AEIs).

“We expect Dasin to acquire two to three more assets in order to maintain a c.8% DPU yield by the time the distribution waiver falls off completely in FY22. As such we raise our terminal growth rate from 0.5% to 1.5% to better reflect the pace of acquisitions,” says Phillip Capital.

As at 12.37pm, units in Dasin Retail Trust, were changing hands at 83.5 cents, up 0.6%.