Quick look into Dasin Retail Trust IPO

About Dasin Retail Trust

The only China retail property trust providing direct exposure to the fast-growing Pearl River Delta region.

Dasin Retail Trust’s principal investment mandate is to invest in,own or develop land, uncompleted developments and income producing real estate in Greater China (comprising PRC, Hong Kong and Macau), used primarily for retail purposes, as well as real estate-related assets, with an initial focus on retail malls.

Brief information on the Initial Property

1. XIAOLAN METRO MALL

• Occupancy is at 100% and WALE is 6 years
• Strong 10-year track record of generating yield
• 100.0% occupancy for nine consecutive years (2007 to 2015)
• Rental escalation clause in the leases provides for an annual adjustment, typically 6.0% to 10.0%
• Dasin Merchant Investment has on 26 December 2016 entered into the Xiaolan Master Lease Agreement with Xiaolan Xinduhui for certain units on the first and the third floors of Xiaolan Metro Mall. The tenures of the Xiaolan Master Lease Agreement Master Lease Agreements are 10 years

2. DASIN E-COLOUR

• Occupancy rate is at 92.8% and Wale is 5 years
• Re positioned from a furniture mall to a trendy mid-end community mall in six months
• Located opposite a 20,000 people strong university
• With many small tenants leasing shop units in the Property, a high proportion of leases expire in FY2018, and it is expected that by FY2018, Dasin E-Colour will be more mature and majority of the leases are expected to be renewed at higher rates
• Dasin Merchant Investment has on 26 December 2016 entered into the  Dasin E-Colour Master Lease Agreement with  Yicai Xinduhui d for certain units on the fourth, eighth and ninth floors as well as the entire seventh floor of Dasin E-Colour.  The tenures of Lease Agreement Master Lease Agreements are 3 years

3. OCEAN METRO MALL

• Occupancy rate is at 99.6% and Wale is 11.9 years
  Limited competition with high upside potential due to rental reversions
• Dominant shopping mall in its trade area in the short to medium term
• Rental escalation clause in the leases provides for an annual adjustment of 7.0% - 10.0%

4 SHIQI METRO MALL - to be acquired by end of Jun 17

• Occupancy rate is at 98.7% and WALE is 5.5 years
  Solid growth in rental income levels
• 100.0% occupancy between 2006 to 2014 and 98.7% as of 30 June 2016
• Tenants’ willingness to renew lease contracts at a higher rate

ROFR Properties 

It will likely concentrated on Pearl River Delta region

Distribution Policy

1. To distribute 100.0% of Distributable Income to Unit holders for Forecast Year 2017 and Projection Year 2018
2. To distribute at least 90.0% of Dasin Retail Trust’s Distributable Income to Unit holders in respect of FY2019 and onward

Distribution Waiver

Prospective unit holder will need to be aware there is distribution waiver from Aqua Wealth and Bounty Way from the listing date until 31 Dec 2021 due to compensate expectation of Ocean Metro Mall and Dasin E-Colour to stabilize as it is relatively new mall

Directors ownership - as per offering

On Value Added Tax

If the Rental Management Companies are unable to continue to apply the simplified collection method and are consequently not able to adequately pass on the tax increase from 5.0% to 11.0% VAT to their tenants, this may result in additional tax burden, which may have an adverse impact on the overall financial results of the Dasin Retail Trust Group, as well as distributions to Unitholders

On Borrowing

As at the Listing Date, the indicative aggregate leverage of Dasin Retail Trust is expected to be approximately 27.3%. Following the acquisition of Shiqi Metro Mall on the Target Shiqi Acquisition
Date, the indicative aggregate leverage of Dasin Retail Trust is expected to be approximately 33.6%.

On Net Asset Value

The issuance of Units under the Offering will be at a discount to Dasin Retail Trust’s NAV. On the
Listing Date, there will be a discount of approximately 21.4% to the NAV per Unit(1) based on the
Offering Price and based on the pro forma total equity as at 30 June 2016 and as at the Latest Practicable Date.

No of unit issues will be 549,606,331 units and Net asset in RMB based on 30 Jun 2016 is 2,702,803,000. The NAV will be around $1 using $1 is around RMB 4.8 hence PB will be around 0.8

Dividend Prospect

Based on the property information on the rental escalation and assumption management to be able to acquire more property funded via debt.  If management able to growth the distributable income by at least 6-7% CAGR then maybe the dividend yield has potential to be supported around 6% based on $0.8 once the dividend waiver is gone. Bearing there is no negative event, e.g VAT implication.

*Not vested at the moment.