A strong finish
Strong results, better fundamentals in FY22E
SASSR’s 4Q21 DPU dipped 1.8% YoY but rose 3.8% QoQ, with 2.2% YoY/6.5% QoQ growth in its entrusted management agreement (EMA) rental income. FY21 DPU at +8.7% YoY was strong, even with c.8% of distributions retained, and ahead of ours and consensus’ estimates. Occupancies rose QoQ, and should improve further in FY22E, after AEIs and tenant remixing efforts. We raise DPUs by 3-4%, and our DDM-based TP rises 5% to SGD1.10 (COE: 9.8%, LTG: 3.0%). We see catalysts from better-than-expected sales
growth, and DPU upside from potential acquisitions, backed by a strong balance sheet and visible sponsor pipeline. BUY.
Sales up c.16.6% QoQ/12.3% YoY in 4Q/FY21
Portfolio sales rose 16.6% QoQ in 4Q21 due to seasonality, but fell 6.8% YoY as pandemic measures checked shopper traffic and higher temperatures curbed buying sentiment. The Chongqing Liangjiang Outlet continued to perform better, with sales at +10.5% QoQ/-4.5% YoY, representing c.52% of 4Q/FY21 sales. Contribution from fashion, sports and international brands rose to c.79% of gross rental income (from c.76% in 3Q21) from higher ASPs, but should ease into the 1H22 summer months. Sales growth
momentum is strong, and we expect better YoY comparables in FY22.
AEIs bolstering occupancies and rents
Portfolio occupancy rose to 94.5% (from 93.7% in 3Q21) with improvements across all outlets. Chongqing Liangjiang remains fully occupied, and yields look set to rise with a conversion of the level 5 office to retail space (which completed in Dec 2021). Hefei’s occupancy climbed further to 95.7% (from 95.2%) post-AEI, while Chongqing Bishan’s occupancy improved to 83.5% (from 82.0%); management expects this to rise further to c.90% in FY22, as an AEI to decant the mall completes in 1Q22, and tenant remixing
initiatives are expected to boost sportswear contribution.
Readying balance sheet for deals
AUM rose 4.4% YoY to SGD1.8b on a stronger rental growth outlook, while gearing at 26.1% (from 27.2% at end-Sep 2021), is the lowest amongst peers, with SGD952m in debt headroom (at 50% limit) to support deals. While opportunities are backed by its sponsor’s 13 pipeline malls, its CEO is eyeing growth from two stabilised ROFR assets in Xi’an and Guiyang. Refinancing options to de-risk its 1.5-year debt maturity profile are underway, and in preparation for a potential acquisition opportunity