Is Sasseur REIT A Good Buy In 2025? [Fundamental Analysis]

In this article, we'll conduct a fundamental analysis and review of Sasseur REIT and its suitability to achieve the following investment objective: To deliver a stable dividend yield of 5% to 6% per year while having high capital preservation ability.

Information Is Accurate Up To March 2025

Business Description

Sasseur REIT is an industrial REIT that was listed in 2018 and owns 4 outlet malls in mainland China.

What I Like About Sasseur:

• Stable operating performances and DPU track record since their listing (Figures 1 & 7)
  

• Till 2028, the majority of the rental income is fixed under the Master Entrusted Management Agreement with an escalation rate of 3% per annum.

• The REIT has one of the healthiest balance sheets with a very low gearing ratio (Figures 4 & 5). However, in a decreasing interest rate environment, being too prudent may not be the ideal capital management strategy.

What I Do Not Like About Sasseur:

• The underlying land leases are very short (Figure 10). This opens investors up to the issue of lease decay.
  

• RMB exposure, while inevitable, might result in higher volatility in DPU performances as a result of foreign exchange volatility.

• The debt profile is still heavily exposed to offshore loans, which have a considerably higher cost of borrowing while at the same time exposing the REIT to foreign exchange risks.

Updates From Recent Performance (FY 2024)

General Comments:

• On a local currency basis, EMA rental income increased by 0.9% as the decline in the variable component income was offset by the increase in the fixed component income.
  

• DPU from operations improved by around 1.36% at the back of a lower financing cost. Reported DPU, however, decreased by 2.7%, largely due to a lower percentage of management fees paid in units and higher retention.
  

• Portfolio occupancy is currently at a record high of 98.9%, which is a 1.3% increase from the previous year.
  

• No major refinancing requirements until 2026.

Positive Headwinds:

• An increasing global trade tension may push consumers to consume locally which could be a tailwind for the local consumer economy.
  

• The government's increasing focus on boosting domestic consumption may result in higher consumer spending which ultimately benefits the local retail sectors.

Negative Headwinds:

• The impact of a global trade war can also cause consumers to be more conservative and spend less in totality.

  
  

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Disclaimer:

This article is meant to be the opinion of the author

This article is for information purposes only

This article should not be seen as financial advice

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