Sasseur Real Estate Investment Trust (SGX: CRPU) has been one of the stocks spared from the brutal global market sell-off in the last few days. Despite China devaluing its currency on Monday, Sasseur REIT’s unit price has stayed roughly unchanged at S$0.80 per share.
More importantly, Sasseur REIT’s second-quarter result seems to justify investors’ confidence in the REIT. The China outlet mall owner posted an impressive 5.9% increase in distribution per unit from the same period last year. With that said, let’s jump into three reasons why investors should be very pleased with the latest results.
Healthy year-over-year growth all round
I was eagerly anticipating Sasseur REIT’s second-quarter results as it marks the first time that we can compare earnings on a year-on-year basis, as the REIT was only listed on 28 March 2018. Sasseur REIT more than delivered in the latest quarter. The REIT, which owns four outlet malls in China, posted solid year-over-year improvements in all the important operating numbers.
EMA rental income, which is rent the REIT collects from its entrusted manager, rose 7.2% on a like-for-like basis compared to last year.
Even though the Chinese yuan weakened against the Singapore dollar, the REIT still managed to post a 6.8% increase in Singapore dollar-denominated distributable income. Most important of all, distribution per unit in Singapore dollar terms rose 5.9% from the corresponding period last year and was also 10.5% higher than the REIT’s projection in its initial public offering (IPO) prospectus.
Outlet sales growth momentum continues
Investors should also be pleased to note that total outlet sales at its four malls increased by 15.4% in the second quarter of 2019 compared to the same period last year. Impressively, its two young malls of Bishan and Hefei malls registered 22.8% and 35.4% sales growth, respectively, in the reporting quarter.
Its mature mall, Chongqing, also registered a 4% increase in tenant sales during the second quarter. Tenant sales are an important metric for Sasseur REIT as it entrusted manager pays the REIT between 4% and 5% of all tenant sales.
Robust financial position
Besides its strong operating metrics, the REIT is also in a great place financially. It has a gearing ratio of 29.7%, one of the lowest among REITs in Singapore and well below the 45% regulatory ceiling imposed on REITs in Singapore.
This gives it the financial muscle to make yield-accretive acquisitions should it see fit. The REIT has a ready pipeline of outlet malls to choose from as it has right of first refusal to a host of properties from its sponsor, Sasseur Group, which is the largest operator of outlet malls in China.
The Foolish bottom line
As a unitholder of Sasseur REIT, I am very pleased with the REIT’s strong performance. The REIT continues to live up to investor expectations and has been consistently outperforming management’s own IPO projections.
That being said, the ongoing trade dispute may lead to further erosion of the Chinese yuan against the Singapore dollar, which could impact Singapore dollar-denominated distributions in the near term. Nevertheless, I believe that Sasseur REIT is well-positioned for long-term growth. The trust can grow organically as its malls mature further and it is also well-placed to ride on the growing demand for discounted branded products.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Jeremy Chia owns shares in Sasseur Real Estate Investment Trust.
Motley Fool Singapore 2019