• We do not have a rating on Sasseur REIT. We recently visited 2 outlet malls in China held by Sasseur REIT during their semi-annual sales, which also coincides with the mooncake festival. The 2 malls are in Chongqing and Hefei.
• Sasseur REIT owns 4 malls there with a total valuation of CNY7.7bn (SGD1.5bn). Combined first-day sales increased 8.9% to CNY215.6m from CNY197.7m in 2018 during the 2-week sales promotion period.

A Retail Outlets REIT With a Geographical Focus on the People’s Republic of China (PRC)

• SASSEUR REIT (SGX:CRPU)’s portfolio comprises four properties located in the PRC with an aggregate NLA of 304,753 sq m and has a valuation of CNY7.71bn – equivalent to SGD1.54bn – as at 31 Dec 2018, as assessed by independent valuer Savills Real Estate Valuation (Beijing). It translates to 14% above the implied acquisition value at the IPO.
• Sasseur REIT's four properties are:
  1. Sasseur (Chongqing) Outlets;
  2. Sasseur (Bishan) Outlets;
  3. Sasseur (Hefei) Outlets;
  4. Sasseur (Kunming) Outlets.

Key Takeaway

• Sasseur REIT owns quality lifestyle outlet malls with a high number of visitors, as well as occupancy rates with reputable local and international brands. In tandem with the increasing income and fast-growing middle-class customer base, the assets are well positioned to capture the growing demand for a lifestyle shopping experience, which includes having a variety of entertainment and leisure amenities available on site.
• China’s outlet industry grew at a CAGR of 30.8% during 2012-2016. The outlet industry there is still at an early stage. According to China Insights Consultancy, the sector is expected to continue to grow at a CAGR of 24.2%, to CNY144.9bn in the five years up to 2021. By 2030, it could surpass the US market (USD91.5bn) to become the world’s biggest outlet market, with approximately CNY640.2bn (USD96.2bn) in annual sales.
• Sasseur Cayman Holdings, the sponsor of the Sasseur REIT, is the leading outlet mall operator in China’s outlet mall industry. The group has 30 years of experience in design and development, as well as operating retail outlet malls.
• The average leverage of 29.7% gearing presents a debt headroom of SGD260m (CNY1.3bn) for acquisitions. The sponsor group operates 10 outlet malls, including the four properties under Sasseur REIT’s portfolio. It also has two right of first refusal properties – the Sasseur (Xi’an) Outlets and Sasseur (Guiyang) Outlets – which can be injected into the REIT. Both malls commenced operations in 2017.

Sasseur REIT’s Share Price Has Climbed 21.6% YTD to SGD0.79

• Sasseur REIT's 2Q19 and 1H19 DPU of 1.608 cents and 3.264 cents surpassed its IPO projection by 10.5% and 9.9%. Trading at a 8.2% yield (annualised), Sasseur REIT is currently the highest yielding among the China retail S-REIT segment, and has 290bps and 140bps spreads above the retail sector and China exposure sector average.
• See Sasseur REIT's share price and Sasseur REIT's dividend history.
• Key risks include the loss of key tenants, adverse economic conditions, increased competition, changes in rules and regulation.

Source: RHB Invest Research - 25 Sep 2019