Further relaxation as shoppers behold – Atrium sales and make up testers are back!
<News Analysis> Singapore Retail: Further relaxation as shoppers behold – Atrium sales and make up testers are back!
- Further relaxation at malls to allow atrium sales with relaxation on ‘mask off’ scenarios such as perfume testing
- Expect pick up in atrium sales revenue and other mall income (carpark) to yield ~2-3% upside to revenues; 1.2 – 5% to DPUs
- Dine-in cap of 5 remains status quo as per our full year base case scenario
- Maintain OVERWEIGHT on retail sector, top picks FCT, CICT,
What’s new?
- Enterprise Singapore released a joint advisory note on updated advisory for safe management measures (SMM) at retail establishments this evening.
- This includes lowered vaccinated-differentiated SMMs requirements at individual retail fronts within retail malls, after initial checks to enter malls.
- SMM measures has also eased for a number of trade sectors such as beauty & health establishments, which are now allowed to put up product testers, and family entertainment centres, which are allowed to operate back at 100% capacity.
- Dine-in cap remains at 5, although groups from the same household may now interact ‘across tables’.
Our thoughts.
A return of atrium sales a blessing for landlord and retailers. As highlighted in our retail outlook report, the return of atrium sales will follow suit in subsequent rounds of relaxation, alongside carpark income in our view. Atrium sales typically contribute up to 2-3% of total rental income for the listed landlords with hot demand periods such as mooncake festivals and year-end Christmas sales. We also understand that forward booking for atrium space rent is generally quite popular even during off-peak season as retailers clear off last-season products. With potentially more inventory back log the past two COVID years, atrium rents will likely see a quick return with high turnover in retail malls. These incremental income streams will directly flow to distributions with low associated operating expenses.
What are possible upside? We understand that atrium sales (or part of ancillary income) and is estimated to contribute between 2-3% of revenues, depending on the mall’s layout. Contribution is larger for the likes of Frasers Centrepoint Trust (“FCT”) where many of the REIT’s suburban malls have large atrium spaces to draw in traffic. In terms of DPU, we estimate that atrium sales, if return strongly, should give a 1.2% – 5.0% boost to DPUs, which will be a welcome upside for retail focused S-REITs.
Estimated Contribution of Atrium sales on revenues and DPU (Pro Forma FY21)
| Atrium sales | % revenue (pre-COVID) | % revenue (FY21) | Scts per share | % of FY21 DPU |
| Mixed Use Commercial REIT | c.1.3% | 1.4% | 0.21 | 2.4% |
| Suntec REIT | c.0.8% | 0.8% | 0.10 | 1.2% |
| Frasers Centrepoint Trust | c.2-3% | c.2-3% | 0.60 | 5.0% |
| Retail focused REIT | c.2% | c.2% | 0.08 | 1.8% |
* Mixed Use Commercial REITs pre-COVID revenue adjusted with full year contribution from acquisitions; FY21 revenue is 1H22 revenue annualised; FY21 DPU is 1H22 DPU annualised
Dine-in cap back to 8 potentially next? Dine-in cap of 5 remains at status quo, as per our full year assumption for the year. The next round of relaxation could potentially see social cap limit relaxed further to 8 or the removal of the ‘one-metre’ rule between tables to increase current capacity limits at F&B establishments, which will be a boost for the F&B players. New rules for dine-in that allows for ‘cross table’ relaxation from groups within the same household may seem like a slight leniency towards this rule. Bigger groups such as families from the same household may now dine-out in F&B establishments, across separate tables.
Rules around ‘mask off’ scenarios relaxed. Notably, ‘mask off’ scenarios have been discussed aplenty in this recent release. With COVID in Singapore now nearing our two-year anniversary, mask-up has been something that we have been conditioned to adapt to and accept. New rules are now working around increasing ‘mask off’ scenarios. Will the day that we are allowed out without mask, like our friends in Europe, be some time this year?