Company Update: Sasseur REIT (SASSR SP/CRPU.SI)
Company Update: 20 October 2023
Site visit to Sasseur REIT’s outlet malls in Chongqing and Xi’an
- We visited three distinct outlet malls during Sasseur’s anniversary sales week in September. These malls encompassed two properties within Sasseur REIT’s portfolio, specifically Chongqing Liangjiang and Chongqing Bishan, alongside the Xi’an outlet held in the Sponsor’s portfolio, potentially subject to acquisition by Sasseur REIT.
- Maintain Outperform. We reiterate our OUTPERFORM rating on Sasseur with an unchanged target price of S$0.95. We believe Sasseur’s performance aligns with our expectations as evident in RMB growth that was offset by foreign exchange fluctuations. Potential upside catalyst could come from its right of first refusal for the Xi’an and Guiyang Outlets from its Sponsors Portfolio.
Chongqing outlet insights
The Chongqing outlets showcased a unique layout where domestic and international brands were thoughtfully arranged by sections. Notably, Chongqing Liangjiang, distinguished as the largest in revenue generation, witnessed strong consumer demand, especially during our weekend visits. The interiors adhere to the iconic Sasseur theme, characterised by the use of red brick walls and red plastering.
Xi’an outlet potential.
Our visit to the Xi’an outlet, presently within the Sponsor’s portfolio, revealed the possibility of Sasseur REIT’s acquisition via their right of first refusal. In contrast to the Chongqing outlets, the Xi’an outlet features a different design aesthetic with clean white finishes and prominent Sasseur branding. Its strategic location, connected to a metro station, attracts a substantial influx of visitors, resulting in creative parking solutions as the parking facilities reach full capacity. This phenomenon underscores the sustained consumer demand for outlet mall sales, despite ongoing challenges in the Chinese economy.
Valuation & Action
We maintain our OUTPERFORM rating and a target price of S$0.95 on Sasseur, based on DDM, with a 9.0% cost of equity and a 2.0% terminal growth rate.
Risks
Higher-than-expected drop in DPU if the sponsor is unable to support the 70% fixed income component. Weaker CNH against SGD is another risk factor given that 100% of sales are derived from China’s retail spending.
