CFA Society Singapore
SINGAPORE (Apr 23): Following a site visit to Sasseur REIT’s outlet malls – Chongqing mall and Hefei mall – during their annual Spring sale, the REIT has attracted the attention of Phillip Capital.
In an unrated report on Monday, analyst Natalie Ong says, “Sasseur’s outlet malls not only offer large discounts on branded goods targeted at the middle class, brand-conscious consumer, but also incorporate numerous activities and entertainment programmes to engage different age group.”
According to Ong, luxury retail demand is expected to grow in China. Globally, Chinese consumers account for about 33% of luxury spending. And pre-2019, the Chinese have taken a lot their spending abroad, due to lofty taxes imposed on luxury items.
Fortunately, the Chinese government has recently implemented policies to reduce import tariffs, lower personal income tax and the imposition of stricter laws on daigou (personal shippers who purchase luxury goods abroad to be resold domestically at a profit). According to Ong, this is primed to benefit the domestic luxury good market.
“Luxury outlet malls such as Sasseur’s, which already have an advantage over luxury-retailers due to the large discounts offered, will also stand to benefit from these policies aimed at spurring domestic spending,” adds Ong.
In addition, unique to Sasseur is its revenue model which is based on an Entrusted Management Agreement (EMA) guaranteeing a minimum revenue level. Although a minimum rent is guaranteed, 80% of the gross revenue from which the EMA Resultant Rents (RR) are derived are based on tenant sales.
Hence, active management of tenants and tenant mix is vital.
Apart from providing luxury goods at a competitive price, Sasseur’s malls organise promotional days once a month to set them apart from the competition.
From the site visit during the Spring sale, Ong witnessed stages set up for performance and entertainment, while popular brands have erected tentages which feature clearance items with discounts up to 90%. There were also children-centric attractions available outside the mall.
Sasseur currently trades at an annualised 8.4% yield which is higher than the 7.4% forecasted yield for 2018.
As at 12.30pm, shares in Sasseur REIT are trading 0.63% higher at 80 cents.