Sasseur REIT (SASSR SP)
Current shareprice: SGD0.86
Target price: SGD0.88
Potential yield: +3%
We maintain a BUY action on this counter. Let’s take a look at the insights of the real estate company.
Sasseur Real Estate Investment Trust is a real estate investment trust established with the investment strategy of investing principally, directly or indirectly, in a diversified portfolio of income-producing real estate, which is used primarily for retail outlet mall purposes, as well as real estate related assets in relation to the foregoing, with an initial focus on Asia. The Company’s assets comprise four retail outlet malls located in the People’s Republic of China: Sasseur (Chongqing) Outlets, Sasseur (Bishan) Outlets, Sasseur (Hefei) Outlets and Sasseur (Kunming) Outlets.
An industry with potential growth:
According to China Insights Consultancy, annual sales for the outlet industry are projected to expand at 5-year CAGR of 22% to reach Rmb140b by 2021. Currently, the supply of outlet malls is not able to meet China’s voracious appetite for branded consumer goods. Demand is underpinned by growth in disposable income per capita projected at CAGR of 7% to reach Rmb34.7b by 2021. The number of upper middle class households is also expected to expand at a 10-year CAGR of 17% and account for 50% of urban households by 2022.
Malls for the mass market:
Sasseur’s malls are designed based on its signature “1+N” concept. “1” represents its modus operandi of attracting consumers with value-for-money branded consumer products. “N” reflects the various lifestyle activities
offered at its outlet malls, such as F&B options and entertainment activities for children. Sasseur enforces strict internal control to detect and prevent sale of counterfeit goods. The zero-tolerance policy requires tenants to refund affected customers 10 times the retail price
of any counterfeit product sold.
Striking a balance between stability and growth:
The Entrusted Management Agreement (EMA) is designed for long-term interest congruency between the Entrusted Manager (EM) and unitholders. Rentals comprise fixed rent – 70% of EMA Resultant Rent (RR) with a 3% built-in annual rental escalation – and a variable component pegged to tenant sales. The structure provides downside protection while enabling upside potential should the outlet malls perform better than expected.
Additionally, EMA formula enables Sasseur to enjoy growth and stability. Sasseur’s leases are structured to provide downside protection while capturing upside potential should the malls perform better than expected. The EMA formula is designed for long-term interest congruency between the Entrusted Manager (EM) and unitholders. The EMA was put in place from 1 Mar 18 for a period of 10 years.
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*** This report is neither an offer nor the solicitation of an offer to sell or purchase any investment. Comments are based on information obtained from sources believed to be reliable but Fides Assets makes no representation and accepts no responsibility or liability as to its completeness or accuracy.