Should You Invest In Sasseur REIT [Fundamental Analysis]

In this article, we'll be conducting a fundamental analysis 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 a high degree of capital preservation ability.

Information Is Accurate Up To March 24

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 REIT:

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
Arguably, the REIT has one of the healthiest balance sheets with a very low gearing ratio (Figures 4 & 5)

What I Do Not Like About Sasseur REIT:

The underlying land lease is very short (Figure 10)
RMB exposure, while inevitable, might result in higher volatility in DPU performances as a result of foreign exchange volatility.
The capital management is questionable given that the REIT has a substantial proportion of offshore in USD and SGD which further escalates the impact of FX volatility given that 100% of their operations are denominated in RMB.

Updates From Recent Performance (FY 2023)

General Comments:

EMA Rental income increased by 10% at the back of higher portfolio outlet sales coupled with a resilient occupancy rate.
DPU is negatively impacted (-4%) mainly as a result of FX losses due to the weakening of RMB against a strengthening SGD.
No major refinancing requirements until 2026.

Positive Headwinds:

The trend towards consumption downgrade is benefiting outlet malls as consumers are being more prudent and smarter about their consumption behaviour which will promote higher growth in traffic and sales in outlet malls.

Negative Headwinds:

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- Work In Progress -

Daniel is a Licensed Independent Financial Consultant with MAS and a Certified Financial Planner (CFP®).

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