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Dasin Retail Trust remains attractive despite expected DPU tapering: Phillip Capital

Michelle Zhu
Michelle Zhu • 2 min read
Dasin Retail Trust remains attractive despite expected DPU tapering: Phillip Capital
SINGAPORE (Mar 5): Phillip Capital is maintaining its “buy” call on Dasin Retail Trust with a 98 cent price target after FY17 revenue and net property income (NPI) came in line with its forecasts.
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SINGAPORE (Mar 5): Phillip Capital is maintaining its “buy” call on Dasin Retail Trust with a 98 cent price target after FY17 revenue and net property income (NPI) came in line with its forecasts.

The research house has raised its DPU estimate for FY18 by 3% to 9.79 cents after factoring in higher NPI margins – which has more than offset its downward revenue forecast by 0.6-1.2% for FY18-19, respectively, from the change in portfolio lease structure.

In a report last Friday, Phillip’s research team says it continues to like Dasin Retail Trust for its continued organic growth with its expansion in baseline revenue and improved y-o-y occupancy, with all malls reporting at 100% occupancy, as well as hardly any gaps between the lease expiry and new lease sign-ups.

While the research house expects DPU to taper upon removal of income support, it highlights the trust’s current yields and valuation as still attractive.

“Stripping out Shiqi Metro Mall, baseline revenue continues to expand, with a positive 12.7% rental reversion in FY2017 (33% of incremental baseline revenue) and step-up escalations from leases expired during the period (67% of incremental baseline revenue),” notes Phillip Capital.

“Operationally, we expect Dasin to deliver healthy organic and inorganic growth. DPU will taper gradually as the income support is removed. Nevertheless, the yields and valuations remain attractive to us. Key risks would be the fall-off of income support in FY21 and currency exposure to the RMB,” it adds.

In the research house’s view, Dasin Retail Trust’s ample debt headroom of 30.7% gearing as at end-FY17 will further support its inorganic growth through a ready pipeline of 19 properties.

“We expect continued organic growth as all malls are reporting at 100% occupancy. Zhongshan’s economy continues to be robust, with GDP expanding 7.73% in 2017 and exports rebounding sharply in 2017 with a YoY growth of 13.6%,” comments the team.

As at 11.49am, units in Dasin Retail Trust are trading flat at 88 cents.

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