Dasin Retail Trust's going concern flagged as auditor notes net current liabilities
THE auditor of Dasin Retail Trust CEDU has flagged a material uncertainty that may cast significant doubt on the real estate investment trust (Reit)'s ability to continue as a going concern, reported the Reit in a bourse filing on Monday (Apr 11).
Deloitte & Touche, in its report on the financial statements of Dasin Retail Trust for the financial year ended December 2021, noted that the Reit and its subsidiaries were in a negative working capital position as at end-December 2021.
The Reit had net current liabilities of S$719.9 million while with its subsidiaries on the group level had net current liabilities of S$663.2 million. The syndicated term loans pertaining to the Xiaolan Metro Mall, Ocean Metro Mall and Dasin E-Colour and Shiqi Metro Mall of S$499.5 million in total are due on Jun 19. The offshore syndicated term loans pertaining to Shunde Metro Mall and Tanbei Metro Mall of S$132.9 million in total are due on Jul 15 and the offshore syndicated term loans pertaining to Doumen Metro Mall of S$105.7 million are due and payable on Sep 18.
The tenure of both the offshore and onshore loans of the Xiaolan Metro Mall, Ocean Metro Mall and Dasin E-Colour and Shiqi Metro Mall have been extended to Jun 19.
The drawdown of the credit loan facility of US$13.1 million in September 2021, which is revolving every 12 months, is also due in September 2022
The auditor said: "These conditions indicate that a material uncertainty exists that may cast significant doubt on the ability of the group and of the trust to continue as going concerns."
But the trust's financial statements have been prepared on a going concern basis as the trustee-manager is in "active" negotiations with the lenders and have assessed that it is appropriate to do so after considering several factors.
The factors include:
- the potential divestment of Shiqi Metro Mall and Xiaolan Metro Mall to a buyout fund;
- the trust's property portfolio is strategically located in the core cities of the Guangdong-Hong Kong-Macau Greater Bay Area where there are "limited" competing properties, with the portfolio having "stable" growth potential from its resilient lease structure, diversified tenants and business mix as well as balanced mix of mature and growth assets;
- the business fundamentals of the group are reasonably "stable" throughout the pandemic; and
- the group has sufficient cash and is able to generate positive cash flow from its operations to meet its day-to-day working capital needs
Therefore, the trust's board stated that trading of the trust's units should not be suspended.
A week ago, another China-focused Reit, EC World Reit, also reported that its auditor had highlighted a material uncertainty in the FY2021 financial statements related to the Reit's ability to continue as a going concern.
EC World Reit manager said it believes that the refinancing exercise will be successfully completed prior to the maturity dates of the term loans.
Dasin Retail Trust units closed flat at S$0.31 on Monday, before the trust manager made this announcement.
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