Brokers' take

Sasseur Reit > Buy Maybank Kim Eng, June 7 June 8 close: S$0.765 Target price: S$0.90

SASSEUR Reit's portfolio of four outlet mall properties in China's fast-growing Tier-2 cities of Chongqing, Hefei and Kunming arguably offers a unique and compelling investment proposition. It captures one of China's most important consumer trends - "premiumisation"; is a frontrunner in China's fastest growing retail format; has downside protection to its distributions with minimum rental guarantees till FY19 while the embedded 10-plus-10-year entrusted management agreements enjoy growth upside from sales-based leases; and has a visible sponsor-led acquisition growth pipeline.

Outlet malls are capturing a larger wallet share of China's brand-conscious, yet price-sensitive "aspirational consumers". The combination of premium product offerings, discounted prices and malls that incorporate lifestyle elements is a potent draw for China's burgeoning middle class. The appeal to brand owners includes the opportunity to offload overstock, predominantly short-term and sales-based leases, and reach out to new customers. With this win-win arrangement, we envisage Sasseur Reit's addressable market growing at 24 per cent compound annual growth rate from 2017 to 2021.