Sasseur Reit | Buy Target price: S$0.91 Sept 27 close: S$0.725 DBS Group Research, Sept 27

Sasseur Reit on Wednesday said it is involved in litigation by its contractor due to a disagreement between the contractor and its sponsor on the final construction sum payable for Sasseur Hefei outlets. The claim by the contractor, Zhongjian Sanju No. 2 Construction Engineering Co (ZS2) is for a sum of 148.4 million yuan (S$29.6 million) and its legal costs. ZS2 has obtained interim orders from the court to freeze some of Sasseur Hefei's bank accounts, which Sasseur Hefei has successfully lifted.

The sponsor's indemnity of the Reit for any potential losses that arise from this lawsuit should calm nerves. As we understand that the construction sums payable of 117.5 million yuan have been provided for, and the sponsor will further indemnify the Reit for any further claims of 30.9 million yuan if it comes true, there is likely to be no material impact on the Reit's distributions.