Should You Be Betting On Dasin Retail Trust?

Dasin Retail Trust (SGX: CEDU) is a SGX-listed REIT that invests in retail malls that are located in the Greater Bay Area (GBA) of China. As of 22 December 2019, Dasin is valued at S$ 543.4 million in market capitalisation. In this article, I’ll highlight on its business model, financial results, and valuation figures. Thus, here are 10 key things to know about Dasin before you invest:

• Initial Portfolio
  Dasin was listed on 20 January 2017 with three retail malls valued at S$ 944.6 million in its initial portfolio. They are Xiaolan Metro Mall, Ocean Metro Mall, and Dasin E-Color and they are all located at Zhongshan. In Q3 2019, they are collectively valued at S$ 846.8 million and accounted for 46.2% of Dasin’s total portfolio valuation. The malls have reported a decline in valuation since its IPO in 2017.
  
  
• Acquisition 1: Shiqi Metro Mall (Shiqi)
  On 19 June 2017, Dasin had completed the acquisition of Shiqi for RMB 1.22 billion, which is a discount from RMB 3.00 billion in valuation as at 30 June 2017. Shiqi is the first retail mall in Zhongshan and is enjoying a 98.0% occupancy rate in Q3 2019 with major tenants namely, RT Mart, Superior City Department Store, Jane Eyre Furniture Mall, Watsons and KFC. In Q3 2019, Shiqi is worth RMB 2.99 billion (S$ 578.8 million) and thus, accounted for 31.6% of Dasin’s total portfolio valuation.
  
  
• Acquisition 2: Doumen Metro Mall (Doumen)
  On 13 September 2019, Dasin had completed its purchase for Doumen at a price of RMB 1.37 billion. It is a eight-storey shopping mall situated at Zhuhai that was acquired at a discount from its valuation of RMB 2.1 billion (S$ 406.3 million) and thus, accounted for 22.2% of Dasin’s total portfolio valuation. It enjoys 99.7% in occupancy ratio with key tenants such as Uniqlo, Starbucks, McDonald’s, MI, and Watsons.
  
  
  
• Portfolio Composition
  Here is a breakdown of Dasin’s property portfolio in Q3 2019:
  
  

Property	Valuation (S$ Million)	Valuation (%)
Xiaolan Metro Mall	438.2	23.9%
Ocean Metro Mall	349.2	19.1%
Dasin E-Color	59.4	3.2%
Shiqi Metro Mall (Acquired on 19/6/2017)	578.8	31.6%
Doumen Metro Mall (Acquired on 13/9/2019)	406.3	22.2%
Dasin’s Total Portfolio	1,831.9	100.0%

• Financial Results
  Since its acquisition of Shiqi in Q2 2017, Dasin had generated S$ 16 – 18 million in group revenue and S$ 5 – 6 million in distributable income on a quarterly basis.
  
  Dasin’s Distribution Per Unit (DPU) figures are computed differently for it includes a distribution waiver. Its major unitholders have structured a distribution waiver where they would be excluded from receiving DPUs from distributable income for the last 5 years. The number of units that will not be entitled to DPUs are given as follows:
  
  

Year	2017	2018	2019	2020	2021
No. of Units(‘000)	302,283	263,811	247,322	192,362	82,441

This also means, overtime, Dasin’s major unitholders would start to get their DPUs as more of their units would be entitled for DPUs.

This caused a fall in DPUs to around 1.70 cents per quarter for the past three quarters (Q1 2019 – Q3 2019) from its highest of 2.23 cents in Q3 2017.

However, if distribution waiver is not applied, Dasin would be declaring a steady DPU of S$ 0.90 – S$ 1.00 per quarter.

• Balance Sheet Strength
  In Q3 2019, Dasin has S$ 717.2 million in total borrowings, thus having a gearing ratio of 36.4%.
  
  
• Major Unitholder
  Zhang ZhenCheng is the largest unitholder of Dasin with 66.2% interest held within Aqua Wealth Holdings Ltd and Bounty Way Investments Ltd as at 15 March 2019. Zhang ZhenCheng is the Chairman of Dasin.
  
  His nephew, Zhang ZhongMing who is the Managing Director of Dasin is also a substantial shareholder of Dasin’s sponsor, Zhongshan Dasin Real Estate Co. Ltd. (Zhongshan Dasin).
  
  
• Growth Potential 1: ROFR Properties
  Zhongshan Dasin has granted Dasin a ROFR pipeline of 18 properties at Zhongshan, Shunde, and Macao of the GBA. Presently, 12 of these real estate have been completed and the remaining 6 assets are still under construction.
  
  
  

Source: Q3 2019 Financial Results of Dasin Retail Trust

• Growth Potential 2: Proposed Acquisition of 2 Retail Malls.
  On 13 November 2019, Dasin has announced its proposed acquisitions of two malls namely, Shunde Metro Mall and Tanbei Metro Mall for S$ 375 million, which is around 25% discount from their valuation.
  
  Shunde Metro Mall is a 9-storey retail mall valued at S$ 487.5 million at present. It enjoys a 99.3% occupancy rate with key tenants namely, Jinyi Cinemas, AEON, Suning, Haidilao, and Starbucks.
  
  Tanbei Metro Mall is a 4-storey retail mall valued at S$ 14.6 million that enjoys 92.3% occupancy rate with major tenants such as Dasin Shinwa Supermarket and Xin Garden.
  
  Upon completion of these acquisitions, Dasin would further expand its property portfolio to S$ 2.21 billion from its current of S$ 1.83 billion.
  
  
• Valuation Figures
  As of 22 December 2019, Dasin is trading at S$ 0.84 a unit. Thus, based on DPU of 1.70 cents a quarter, its gross distribution yield is 8.10% per annum presently. In Q3 2019, Dasin has net assets of S$ 1.37 a unit and thus, having a current P/B Ratio of 0.61. 

VIA’s Verdict 

So, the question is: ‘Should I invest in Dasin at S$ 0.84 a unit today as it offers a dividend yield of 8+% and is trading at a discount from its book value?’ 

First, Dasin is positioned to capitalise on the GBA Master Plan where the area is intended to be developed into a vibrant world-class city cluster, focusing on key areas such as finance, technology & innovation. It has 18 ROFR properties that are based in Zhongshan which is located at the heart of GBA and offering Dasin opportunities for acquisition growth in the future. 

Second, it is worth taking note that Dasin’s properties have experienced a fall in valuation since its IPO. This is due to a fall in valuation fall in RMB terms and as well as depreciation of the RMB against the SGD, which had caused a fall in the REIT’s net asset value and DPU figures since IPO. 

So, there are both pros and cons to Dasin. It is best to weigh the two carefully before making an investment decision. 

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