Dasin Retail Trust (SGX: CEDU) Share Price At S$0.81: Is This A Buy?
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Dasin Retail Trust (SGX: CEDU) Share Price At S$0.81: Is This A Buy?

Sudhan P
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Dasin Retail Trust (SGX: CEDU) is a property trust with a share price (technically known as unit price for REITs and property trusts) of S$0.81 at the time of writing.

At that unit price, Dasin Retail Trust is valued at a price-to-book (PB) ratio of 0.6x and has a distribution yield of around 7%.

Does the property trust attract me as a long-term investor?

Let’s explore using my 10-step guide to pick the best Singapore REITs.

How to pick the best REITs

As a summary, here are the 10 steps I use to pick the best Singapore REITs:

  1. Growth in Gross Revenue and Net Property Income
  2. Growth in Distribution Per Unit
  3. Property Yield of Between 5% and 9%
  4. Gearing Ratio of Below 40%
  5. Interest Coverage Ratio of Above 5x
  6. Healthy Portfolio Occupancy Rate
  7. Positive Rental Reversions
  8. Presence of Growth Prospects
  9. Acceptable Price-to-Book Ratio
  10. Distribution Yield of Above 5%

Business Background

Dasin Retail Trust, which was listed on 20 January 2017, is the only public China retail property trust in Singapore providing direct exposure to the Guangdong-Hong Kong-Macau Greater Bay Area.

The trust’s portfolio consists of real estate-related assets used mainly for retail purposes.

As of 31 December 2019, Dasin Retail Trust’s portfolio had five shopping malls located in Zhongshan and Zhuhai cities of Guangdong, China, with a valuation of around RMB9.5 billion (S$1.8 billion). The properties have a tenant base of more than 500 local and international retailers.

The sponsor of Dasin Retail Trust is Zhongshan Dasin Real Estate Co Ltd, one of the leading real estate developers in Zhongshan, Guangdong.

1. Gross Revenue and Net Property Income (NPI) Check

Check for: Increasing gross revenue and NPI

Dasin Retail Trust has a financial year that ends on 31 December each year. Let’s check how the property trust has performed financially since its listing:

 FY2017FY2018FY2019
Gross revenue
(RMB‘ million)
282.6350.1384.5
Net property income
(RMB‘ million)
228.0281.5303.5
Gross revenue
(S$‘ million)
57.771.376.0
Net property income
(S$‘ million)
46.657.360.0

Dasin Retail Trust’s gross revenue and NPI have grown from 2017 to 2019.

However, for the first quarter of 2020, Dasin Retail Trust’s gross revenue and NPI (in Singapore dollar terms) tumbled by 21% and 30%, respectively, as compared to 2019’s first quarter mainly due to the impact from Covid-19.

Verdict: Pass

2. Distribution Per Unit (DPU) Check

Check for: Increasing DPU

Next, let’s look at Dasin Retail Trust’s DPU over the past three years.

 FY2017FY2018FY2019
Distribution per unit with distribution waiver (Singapore cents)7.167.226.82
Distribution per unit without distribution waiver (Singapore cents)3.253.813.95

The trust’s DPU (with distribution waiver) has been falling from 2017 to 2019.

For its 2020 first-quarter, on the back of lower gross revenue and NPI, DPU (with distribution waiver) tumbled 58% year-on-year to 0.71 Singapore cent.

An important thing to note about Dasin Retail Trust’s DPU is that its major unitholders, Aqua Wealth Holdings Limited and Bounty Way Investments Limited, have agreed to waive a portion of their entitlement to the trust’s distributions for the benefit of other unitholders until some of the properties in Dasin Retail Trust’s portfolio stabilise.

This distribution waiver is for around five years, commencing from Dasin Retail Trust’s listing date to 31 December 2021.

As the rental levels for the portfolio are expected to increase to a level that is comparable to the market rate over time, the percentages and number of units held by the major unitholders which will not be entitled to distributions will decrease over time as shown below:

Dasin Retail Trust distribution waiver schedule
Source: Dasin Retail Trust IPO prospectus

This is how the distribution waiver schedule looks like in pictorial format:

Dasin Retail Trust distribution waiver schedule (blocks)
Source: Dasin Retail Trust 2019 earnings presentation

If Dasin Retail Trust’s properties do not stabilise by the end of 2021, we could see a huge fall in DPU since the distribution waiver would have expired.

Verdict: Fail 

3. Property Yield Check 

Check for: Property yield of between 5% and 9%

For 2019, Dasin Retail Trust had an NPI of S$60.0 million and a portfolio value of S$1.83 billion. This translates to a property yield of just 3.3%.

Dasin Retail Trust fails this criterion as well.

Verdict: Fail

4. Gearing Ratio Check

Check for: Gearing ratio below 40%

Dasin Retail Trust had a healthy gearing ratio of 36.2% (as of 31 March 2020), which is well within my threshold.  

Another plus point is that Dasin Retail Trust doesn’t have any significant refinancing requirements until 2021.

Verdict: Pass

5. Interest Coverage Ratio Check

Check for: Interest coverage ratio above 5 times

At the end of 2019, Dasin Retail Trust had an interest cover of just 2.9 times, which is below my threshold of 5 times.

Verdict: Fail

6. Portfolio Occupancy Rate Check

Check for: Healthy portfolio occupancy rate

Dasin Retail Trust’s portfolio as a whole was around 97% occupied, as of 31 March 2020, which is healthy. 

Dasin Retail Trust portfolio details
Source: Dasin Retail Trust 1Q2020 business update

Verdict: Pass

7. Rental Reversion Check

Check for: Positive rental reversions

Dasin Retail Trust passes the rental reversion check as the majority of its gross rental income is from fixed rent with built-in rental escalations.

Dasin Retail Trust rental escalation
Source: Dasin Retail Trust 1Q2020 business update

Verdict: Pass

8. Growth Prospects Check

On top growth via organic means as discussed above, Dasin Retail Trust can also grow through inorganic means, or through acquisitions.

With over 10 properties that can be acquired from its sponsor, Zhongshan Dasin Real Estate, under the right of first refusal (ROFR) agreement, Dasin Retail Trust sure has a long runway for growth in China.

The ROFR arrangement ensures that Zhongshan Dasin Real Estate offers the properties to Dasin Retail Trust for purchase consideration first before any other company.

Dasin Retail Trust ROFR properties
Source: Dasin Retail Trust 2019 earnings presentation

Another growth avenue is from Doumen Metro Mall, which was acquired by Dasin Retail Trust on 12 September 2019. Since the property has only contributed to around three months of rental income in 2019, Dasin Retail Trust’s 2020 gross revenue should increase.

Unitholders of Dasin Retail Trust have approved the acquisition of  Shunde Metro Mall and Tanbei Metro Mall at an extraordinary general meeting held in December 2019. Once the properties have been purchased and injected into the trust, Dasin Retail Trust’s gross revenue, NPI, and DPU could get a boost as well.

Verdict: Pass

9. Price-to-Book Ratio Check

Check for: Acceptable price-to-book ratio 

At Dasin Retail Trust’s unit price of S$0.81, it is valued at a PB ratio of 0.59x, which is below 1x and could mean it’s undervalued.

We are unable to compare its current PB ratio with its historical five-year average since the REIT was listed only in 2017.

Verdict: Pass 

10. Distribution Yield Check

Check for: Distribution yield to be above 5% 

At Dasin Retail Trust’s unit price of S$0.81, it has a trailing distribution yield of 7.2%, which is more than 5%.

Verdict: Pass

The Final Verdict

Dasin Retail Trust has a final score of 7/10.

Even though the property trust looks undervalued with its low PB ratio and high distribution yield, I’m not comfortable investing in it due to its falling DPU over the last three years, even with distribution waiver.

Also, when the distribution waiver expires next year, the downside risk to DPU could be high if Dasin Retail Trust’s certain properties don’t stabilise by then.

Therefore, I’d place Dasin Retail Trust on my watchlist. 

Would You Invest In Dasin Retail Trust?

Come discuss your thoughts and more in the Seedly Community under a page specifically dedicated to Dasin Retail Trust (SGX: CEDU). 

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. ​Readers should always do their own due diligence and consider their financial goals before investing in any stock. 

About Sudhan P
It isn't fair competition when only one company in the world makes Monopoly. But I love investing in monopolies. Before joining the Seedly hood, I had the chance to co-author a Singapore-themed investment book – "Invest Lah! The Average Joe's Guide To Investing" – and work at The Motley Fool Singapore as an analyst.
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