(SASSR.SP / CRPU.SI)
DPU upgraded on lower funding costs
REIT
1H26 DPU rose 10.2% YoY to 3.366 Scents, with income available for distribution before retention increasing 11.5% to S$47.3mn. We raise FY26F DPU by 10.6% to 6.565 Scents and FY27F DPU by 11.5% to 6.651 Scents, supported by stronger EMA rental income, lower finance costs and RMB appreciation against the SGD. Our FY26F forecast implies 2H26F DPU of 3.199 Scents, up 3.8% YoY, reflecting an expected moderation from the strong first half.
1H26 portfolio outlet sales grew 7.4% YoY to RMB2,344.8mn, the highest first-half result since listing. Q1 sales rose 11.4% following successful Chinese New Year campaigns, while Q2 growth moderated to 2.1% as Hefei and Kunming underwent AEI works and tenant-mix repositioning. Shopper traffic rose 20.7% to 9.8mn against sales growth of 7.4%, implying that sales per shopper visit declined by approximately 11%, reflecting some combination of weaker conversion and lower transaction values.
The March 2026 refinancing of RMB901.9mn of onshore facilities cut the weighted average cost of debt to 3.7% p.a. from 4.4% at end-2025 and extended the relevant maturity from 2028 to 2031. Finance costs fell 29.8% YoY to S$8.3mn. Aggregate leverage stands at 25.6% with ICR at 5.6x and 100% of borrowings denominated in RMB.
We maintain our OUTPERFORM rating on Sasseur REIT with a raised target price of S$0.88 (previously S$0.87), based on a DDM valuation with an 8.7% cost of equity and 1.5% terminal growth rate. Our raised cost of equity reflects the uncertainty surrounding the EMA renewal and the lower sales productivity implied by footfall growing materially faster than outlet sales.
Key downside risks include (i) less-favourable EMA renewal terms; (ii) RMB depreciation against SGD; (iii) slower-than-expected household spending recovery; and (iv) competition arising from online retail and new outlet supply.
