Monday, February 18, 2019

Sasseur Reit - DPU For FY18 Exceeds IPO Forecast By 12.6%

Sasseur Reit reports their Q4 and FY18 results this evening which impresses.


To recap, Sasseur is using a concessionary business model where retailers pay a fixed sum or percentage of revenue to the operator and it outsources the running of the retail malls operations such as the merchandising, cashiering, store management back to all the operator.

What this means is in a retraction period where sales are low, they will then pay a lower overhead cost subsequently to the operator and when sales turnover are good, as we have seen in their Q4 results, they will pay a higher cost.

This is what explains when they talk about including and excluding the straight line effect in their results.

Operationally, both excluding and including straight line effect, they have performed better than the IPO expected forecast.

This is due to stronger turnout of customers which lead to higher sales turnover which leads to a higher variable income.

DPU for the full year stands at 5.128 cents, which translates to about 9.4% yield at the current price of today.

If you manage to catch them a few weeks ago at their lows of 64 cents, that represents a yield of over 12%.

If you are holding this from the IPO days of 80 cents, you're still underwater at the moment.

The management gave some outlook updates on the supply of new competition for their various outlets.

Approximately 2.2m of retail space will be coming in from this year to 2021, which will add to the existing 5.7m of retail market in Chongqing. Most of them will be located outside the business district.

There are two new malls that have opened in Kunming - Dayue and Wuyue plaza, which brands traditional retails. Management remains upbeat about the prospect consumer spending growth in Kunming.

Do note Sasseur is under the minimum rent model for FY18 and FY19 but of which does not apply to FY18 as it has seen stronger growth so another "solid" year in FY19 would have seen this model being removed after the end of FY19.

After that, it is implied that the outlets are operationally stable and they will be left to perform up on their "own". 

Thanks for reading.

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