Sasseur REIT - DBS Research 2024-02-22: Spending Wariness Promising For Outlet Malls

• Sasseur REIT (SGX:CRPU) reported topline EMA rental income of RMB658.5m (+10.7% y-o-y) in FY23, boosted by higher variable component rents, which rose 31.7% y-o-y in tandem with underlying portfolio sales.
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• Full year DPU of 6.25 cents (-4.6% y-o-y) came in slightly behind our estimates of 6.4 cents on a 93% pay-out ratio. See Sasseur REIT's distribution dates.

Portfolio occupancy & valuation remains stable

• Portfolio occupancy remains stable at 97.6% as of end-FY23 (vs. FY22 occupancy of 92.3%).
• With improving cash flow from underlying sales, Sasseur REIT's portfolio valuation was flat y-o-y at RMB 8,497m (+0.02% y-o-y) on local currency terms.
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Interest cost should have peaked at the current 5.6%.

• Cost of borrowing rose 80 bps y-o-y to 5.6% as of 31 December 2023, reflecting refinancings completed in 1Q23. Financing cost is the biggest woe faced by Sasseur REIT given both improving operations and a comfortably low gearing of 25%. We believe that current cost of borrowing would likely have peaked at current rates, given both a decline in offshore cost of debt and onshore 5-year PBoC rates, which declined 65 bps y-o-y to 3.95% (Feb 24).
• Sasseur REIT will consider the early refinancing of upcoming FY24 expiries (sponsor loan) to take advantage of dovish onshore rates. Based on its sensitivity analysis, every 50 bps decrease in Sasseur REIT’s onshore RMB loans will see a 0.07scts uplift to underlying DPUs.

Outlet sales continue to hold many promises in FY24.

• Read more at SGinvestors.io.

Geraldine WONG DBS Group Research | Derek TAN DBS Research | https://www.dbs.com/insightsdirect/ 2024-02-22 SGinvestors.io

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