Sasseur REIT - DBS Research 2023-02-20: Recovery On Track As China Reopens

• Sasseur REIT (SGX:CRPU) reported 2H22 EMA rental income of RMB292.9m (-5.1% y-o-y). This was led by lower variable EMA rents, which declined 22.7% y-o-y in 2H22 with the effect of hikes in COVID cases and lockdown woes concentrated in 4Q22. This brings full-year EMA rental income to RMB594.7m (-2.8% y-o-y) and distributable income to S$88.5m (- 5.8% y-o-y) on higher interest expenses on offshore borrowings.

Full-year DPU at 6.55 cents, below estimates due to 2H lockdown woes

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• Sasseur REIT's DPU for 2H22 declined 15.8% y-o-y to 3.14 cents. DPU for the full year was 6.55 cents, a 7.8% dip y-o-y, and behind our estimate of 7.02 cents.

Widespread COVID-19 impact concentrated in 4Q22 as China reopens

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• Sasseur REIT’s operations were also adversely hit through mandated closures and shortened operating hours at three of its four portfolio malls. Specifically, across Chongqing’s lockdown in 4Q22, Sasseur REIT’s Liangjiang mall and Bishan mall were mandated to close for a period of approximately three weeks.
• Correspondingly, total outlet sales in 2H22 dipped 23% y-o-y, with most of the decline back loaded in 4Q22. As such, the variable component of EMA rental income in 4Q22 dipped 39% y-o-y.
• Sasseur REIT's portfolio occupancy improved to 97.2%, a record high level since the REIT’s IPO, reaping the benefits of the recent AEI completions.
• Sasseur REIT's portfolio valuation as at year end 2022 was flat (-0.02% y-o-y) in RMB terms and declined 9.0% y-o-y in S$ terms on currency exchange, bringing Sasseur REIT's NAV per unit to 0.87 cents (from 0.99 cents in FY21).

Refinancing of IPO loans in three tranches for greater financial flexibility

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Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2023-02-20 SGinvestors.io

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