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 munyee.lock@cgsi.com [[1]]
- LI Jialin
- T (65) 6210 8663
- E jialin.li@cgsi.com [[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]].
