CGS International
May 15, 2025
Sasseur REIT: Robust EMA Structure Drives Optimistic Outlook
Sasseur REIT: Benefiting from Robust EMA Structure
- 1Q25 EMA rental income of S\$32.5m aligns with forecasts, representing 25.4% of FY25 projections [[1]].
- Portfolio occupancy remains stable at 98.9% as of end-1Q25, despite a slight 0.9% yoy dip in tenant sales during the quarter [[1]].
- Maintains an “Add” rating with an unchanged target price (TP) of S\$0.85 [[1]].
1Q25 Business Update Highlights
Sasseur REIT (SASSR) reported a 1Q25 entrusted management agreement (EMA) rental income of S\$32.5m (-0.2% yoy). This marginal decrease is attributed to weaker forex conditions and reduced variable income [[1]]. However, in Rmb terms, EMA rental income increased by 1.6% yoy, driven by a higher fixed component, which was partially offset by a decrease in variable income due to softer tenant sales performance [[1]].
Portfolio Occupancy and Tenant Sales
- Portfolio occupancy remained stable qoq at 98.9% at the end of 1Q25 [[1]].
- Occupancy improvements in Chongqing Bishan and Kunming were slightly offset by a dip in Hefei outlets [[1]].
- 1Q25 tenant sales decreased by 0.9% yoy to Rmb1,247.7m, influenced by slower sales in March 2025 due to cautious consumer spending post-Lunar New Year [[1]].
- Chongqing Bishan, Hefei, and Kunming outlets experienced weaker sales yoy, while Chongqing Liangjiang saw improved performance due to new product offerings [[1]].
- VIP membership expanded by 3.5% qoq in 1Q25, reaching 4.31m members, contributing over 60% of portfolio sales [[1]].
Low Gearing and Refinancing
- SASSR’s gearing stood at 25.9% at the end of 1Q25 [[1]].
- 1Q25 interest cost decreased qoq to 5% [[1]].
- Secured a 10-year green loan to refinance its Rmb308 sponsor loan in 1Q25 [[1]].
- Undertook an early partial repayment of its offshore loan with another loan from its sponsor in March 2025 [[1]].
- Management expects average funding cost to potentially drop to 4.5-5% for FY25F [[1]].
- 70% of SASSR’s loans are denominated in Rmb, optimizing funding costs [[1]].
Acquisition Opportunities
- In addition to two assets with the right-of-first-refusal (ROFR), SASSR is exploring acquisition opportunities within the other assets managed by its sponsor [[1]].
- Sasseur Group, the sponsor, manages 18 outlet malls, including the four properties owned by SASSR [[1]].
Investment Recommendation
- Maintains an “Add” rating with an unchanged DDM-based TP of \$0.85 [[1]].
- Positive outlook due to exposure to the resilient outlet mall segment and the stable EMA rental income structure [[1]].
- Potential re-rating catalysts include better-than-projected tenant sales and improvements in discretionary consumption in China [[1]].
- Key downside risks include high cost of capital eroding positive accretion yield gap and slower-than-expected outlet mall sales [[1]].
Analyst Information
- LOCK Mun Yee
- T (65) 6210 8606
- E [email protected] [[1]]
- LI Jialin
- T (65) 6210 8663
- E [email protected] [[1]]
Financial Summary
Key financial forecasts for Sasseur REIT are outlined below [[1]]:
| (S\$m) | Dec-23A | Dec-24A | Dec-25F | Dec-26F | Dec-27F |
|---|---|---|---|---|---|
| Gross Property Revenue | 126.7 | 123.7 | 127.6 | 131.9 | 136.5 |
| Net Property Income | 126.7 | 123.7 | 127.6 | 131.9 | 136.5 |
| Net Profit | 61.81 | 56.17 | 78.83 | 82.01 | 85.64 |
| Distributable Profit | 77.37 | 75.92 | 77.95 | 81.12 | 84.71 |
| Core EPS (S\$) | 0.052 | 0.054 | 0.063 | 0.065 | 0.067 |
| Core EPS Growth | (8.4%) | 3.7% | 16.7% | 3.2% | 3.5% |
| FD Core P/E (x) | 12.39 | 11.94 | 10.23 | 9.92 | 9.58 |
| DPS (S\$) | 0.062 | 0.060 | 0.062 | 0.064 | 0.066 |
| Dividend Yield | 9.7% | 9.4% | 9.6% | 9.9% | 10.3% |
| Asset Leverage | 24.8% | 24.5% | 24.2% | 23.9% | 23.6% |
| BVPS (S\$) | 0.82 | 0.83 | 0.84 | 0.84 | 0.83 |
| P/BV (x) | 0.78 | 0.77 | 0.76 | 0.77 | 0.77 |
| Recurring ROE | 6.14% | 6.51% | 7.49% | 7.68% | 8.02% |
Peer Comparison
A comparison of Sasseur REIT against its peers in the SREIT sector as of May 14, 2025 [[2]]:
| Sector | Company | Ticker | Rec. | Price (LC) | Target Price (LC) | Mkt Cap (US \$m) | Last reported asset leverage | Last stated NAV | Price / NAV | Dividend Yield (%) FY25F | Dividend Yield (%) FY26F | Dividend Yield (%) FY27F |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Hospitality | CapitaLand Ascott Trust | CLAS SP | Add | 0.86 | 1.13 | \$2,528 | 39.9% | 1.15 | 0.75 | 7.1% | 7.3% | 7.4% |
| Hospitality | CDL Hospitality Trust | CDREIT SP | Add | 0.79 | 0.87 | \$766 | 41.8% | 1.48 | 0.53 | 6.6% | 7.7% | 8.0% |
| Hospitality | Far East Hospitality Trust | FEHT SP | Add | 0.57 | 0.74 | \$887 | 31.2% | 0.92 | 0.62 | 6.7% | 6.8% | 6.9% |
| Hospitality | Frasers Hospitality Trust | FHT SP | NR | 0.69 | NA | \$773 | 35.0% | 0.64 | 1.07 | 4.1% | 4.4% | 4.8% |
| Industrial | AIMS AMP AAREIT | SP NR | 1.29 | NA | \$754 | 33.7% | 1.26 | 1.02 | 7.4% | 7.3% | 7.5% | |
| Industrial | CapitaLand Ascendas REIT | CLAR SP | Add | 2.61 | 3.10 | \$8,845 | 38.9% | 2.20 | 1.19 | 5.9% | 6.1% | 6.2% |
| Industrial | ESR-REIT | EREIT SP | Add | 2.21 | 0.36 | \$1,367 | 42.8% | 0.28 | 8.04 | 1.0% | 1.0% | 1.0% |
| Industrial | Frasers Logistics & Commercial Trust | FLT SP | Add | 0.84 | 1.11 | \$2,434 | 36.1% | 1.08 | 0.78 | 6.8% | 6.4% | 6.5% |
| Industrial | Keppel DC REIT | KDCREIT SP | Add | 2.17 | 2.48 | \$3,771 | 30.2% | 1.53 | 1.42 | 4.6% | 4.7% | 4.9% |
| Industrial | Mapletree Industrial Trust | MINT SP | Add | 1.94 | 2.56 | \$4,261 | 40.1% | 1.71 | 1.13 | 7.0% | 6.8% | 6.9% |
| Industrial | Mapletree Logistics Trust | MLT SP | Add | 1.11 | 1.63 | \$4,331 | 40.7% | 1.31 | 0.85 | 7.3% | 6.7% | 6.7% |
| Industrial | Stoneweg European REIT | SERT SP | Add | 1.50 | 1.93 | \$944 | 42.9% | 1.98 | 0.76 | 8.8% | 9.0% | 9.5% |
| Industrial | Sabana Shariah SSREIT | SP NR | 0.36 | NA | \$291 | 37.4% | 0.50 | 0.72 | 0.0% | 0.0% | 0.0% | |
| Office | Keppel REIT | KREIT SP | Add | 0.85 | 1.08 | \$2,540 | 42.1% | 1.24 | 0.69 | 6.4% | 6.7% | 6.9% |
| Office | OUE REIT | OUEREIT SP | Add | 0.29 | 0.33 | \$1,230 | 40.6% | 0.59 | 0.49 | 6.9% | 7.3% | 7.6% |
| Office | Suntec REIT | SUN SP | Hold | 1.14 | 1.26 | \$2,579 | 43.4% | 2.01 | 0.57 | 5.5% | 5.8% | 6.1% |
| Retail | CapitaLand Integrated Commercial | CICT SP | Add | 2.04 | 2.45 | \$11,491 | 38.7% | 2.09 | 0.98 | 5.5% | 5.8% | 6.0% |
| Retail | Frasers Centrepoint Trust | FCT SP | Add | 2.19 | 2.70 | \$3,411 | 38.6% | 2.22 | 0.99 | 5.6% | 5.7% | 5.9% |
| Retail | Lendlease Global Commercial REIT | LREIT SP | Add | 0.50 | 0.69 | \$942 | 38.0% | 0.74 | 0.68 | 7.9% | 7.9% | 8.0% |
| Retail | Mapletree Pan Asia Commercial Trust | MPACT SP | Add | 1.21 | 1.48 | \$4,912 | 37.7% | 1.78 | 0.68 | 6.6% | 6.9% | 7.0% |
| Retail | Paragon REIT | PGNREIT SP | Hold | 0.98 | 0.98 | \$2,132 | 35.3% | 0.92 | 1.07 | 5.2% | 5.4% | 5.6% |
| Retail | Starhill Global REIT | SGREIT SP | Add | 0.50 | 0.60 | \$885 | 36.2% | 0.69 | 0.72 | 7.2% | 7.3% | 7.4% |
| Overseas-centric | CapitaLand China Trust | CLCT SP | NR | 0.69 | NA | \$916 | 42.6% | 1.09 | 0.63 | 8.4% | 8.5% | 8.6% |
| Overseas-centric | Elite UK REIT | ELITE SP | Add | 0.30 | 0.35 | \$235 | 43.0% | 0.40 | 0.75 | 9.8% | 9.8% | 9.8% |
| Overseas-centric | Manulife US REIT | MUST SP | Add | 0.06 | 0.13 | \$112 | 60.8% | 0.23 | 0.27 | 0.0% | 43.8% | 50.8% |
| Overseas-centric | Sasseur REIT | SASSR SP | Add | 0.64 | 0.85 | \$619 | 25.9% | 0.83 | 0.77 | 9.6% | 9.9% | 10.3% |
| Healthcare | Parkway Life REIT | PREIT SP | Add | 4.06 | 4.91 | \$2,040 | 36.1% | 2.42 | 1.68 | 3.8% | 4.2% | 4.3% |
ESG Analysis
An overview of Sasseur REIT’s ESG performance and initiatives [[3]]:
- LSEG ESG Scores: SASSR’s FY24 ESG score was C+, with C for Environmental, C- for Social and B- for Governance. [[3]]
- ESG Controversies: It scored well in ESG Controversies with an A+ [[3]].
- Strategic Direction: Aims to be a top outlet mall brand, providing premium products at attractive prices. Aligns business objectives with sustainability goals, ensuring strong corporate governance, fair employment practices, and efficient consumption of resources [[3]].
- FY25F Targets: Includes replacing the air-conditioning system at Chongqing Liangjiang outlet mall with an energy-efficient system, starting in 1Q25 and expected to be completed by 2027F. Plans to install energy-saving LED displays at its Hefei outlet mall by 1Q25 [[3]].
- Product Authenticity: Ensures authentic high-quality products are sold at its outlet malls through regular inspections [[3]].
ESG Concerns and Implications
- Environmental Innovation: LSEG rated SASSR a D- for environmental innovation and D+ for community, and C- for shareholders in 2024 [[3]].
- Unmet Targets: The target to reduce energy and water intensity for landlord-controlled areas by 1% yoy in 2024 was not achieved [[3]].
- Valuation: Current valuations do not ascribe a premium/discount to the Environmental pillar. Improvement in this pillar could boost the overall ESG score [[3]].
ESG Highlights and Implications
- Emission Intensity: SASSR saw 13.4% higher emission intensity for its Scope 1 and Scope 2 emissions in FY24 due to standardization and refinement of the outlets’ gross floor area calculations [[3]].
- Resource Intensity: Energy and water intensity for landlord-controlled areas increased 14.9% and 12.6% yoy, respectively, due to extreme heatwave conditions in Chongqing in 3Q24 and extended opening hours for promotional events [[3]].
- Employee Turnover: Employee turnover rate increased to 53.8% in FY24 vs 23.1% in FY23. Average employee training hours decreased to 23 hours (vs. 32 hours in FY23) [[3]].
- Valuation Perspective: No premium/discount has been applied for ESG in fundamental valuations. Continued ESG efforts could lead to improved operational efficiencies and financial performance [[3]].
Trends and Implications
- Management and Workforce: SASSR scored well in management (B+) and workforce (B-) categories, as ranked by LSEG [[3]].
- Valuation: No premium/discount has been applied for ESG in fundamental valuations of SASSR [[3]].
