Financial Information

Unaudited Financial Statements and Distribution Announcement For the Third Quarter Ended 30 September 2021

Financials Archive

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Profit & Loss

Balance Sheet

Review of Performance

3Q 2021 vs 3Q 2020

In RMB terms, total outlet sales for 3Q 2021 were lower than that of 3Q 2020 by RMB 114.0 million or 10.3%. Impact on 3Q 2021 EMA rental income (excluding straight-line adjustments) was cushioned by the fixed component of EMA rental income, as structured in the Entrusted Management Agreement (EMA), resulting in a marginal decline of RMB 2.2 million or 1.4% in EMA rental income (excluding straight-line adjustments) as compared to 3Q 2020. In SGD terms, EMA rental income (excluding straight-line adjustments) for 3Q 2021 was higher than 3Q 2020 by S$1.2 million or 3.9%, mainly due to the appreciation of Renminbi against Singapore Dollar as compared to 3Q 2020.

Higher manager’s management fees for 3Q 2021 were in line with higher distributable income as compared to 3Q 2020.

Trust expense for 3Q 2021 was lower than 3Q 2020 by S$0.3 million or 33.5%, mainly due to the absence of additional professional fees incurred for the refinancing in September 2020.

Finance costs for 3Q 2021 were lower than 3Q 2020 by S$1.2 million or 16.8%, mainly due to the refinancing exercise in September 2020, which successfully lowered the weighted average cost of borrowings to 4.4% (3Q 2020: 4.8%).

Tax expense for 3Q 2021 was higher than 3Q 2020 by S$0.6 million or 15.3%, mainly due to lower expenses available for tax deduction.

Income available for distribution to Unitholders before retention for 3Q 2021 was S$23.2 million, 9.4% higher compared to S$21.2 million for 3Q 2020.

In anticipation of asset enhancement initiatives and working capital requirements, S$1.0 million of the income available for distribution has been retained for 3Q 2021. After cash retention, the amount to be distributed to Unitholders for 3Q 2021 was S$22.2 million.

YTD 2021 vs YTD 2020

In RMB terms, total outlet sales for YTD 2021 grew significantly by RMB 541.9 million or 21.8% from YTD 2020, propelled by proactive asset management strategies which include revitalising tenant mix, asset upgrading and careful curation of offerings. EMA rental income (excluding straight-line adjustments) for YTD 2021 was higher by RMB 32.9 million or 7.8% as compared to YTD 2020. In SGD terms, EMA rental income (excluding straightline adjustments) for YTD 2021 was higher by S$10.4 million or 12.5% as compared to YTD 2020.

Higher manager’s management fees for YTD 2021 were in line with higher distributable income as compared to YTD 2020.

Trust expense for YTD 2021 was lower than YTD 2020 by S$0.3 million or 13.7%, mainly due to the absence of additional professional fees incurred for the refinancing in September 2020.

Finance costs for YTD 2021 were lower than YTD 2020 by S$2.8 million or 13.6%, mainly due to the refinancing exercise in September 2020, which successfully lowered the weighted average cost of borrowings to 4.4% (YTD 2020: 5.1%).

Net fair value gains on financial derivatives of S$0.2 million for YTD 2021 were attributable to the mark-tomarket valuation of interest rate swap and cross currency swap contracts which were entered into to hedge interest rate and foreign currency risk exposures.

Tax expense for YTD 2021 was higher than YTD 2020 by S$2.0 million or 18.7%, mainly due to higher operational profit as compared to YTD 2020 which was impacted by the temporary closure of outlets due to the outbreak of COVID-19 pandemic in early 2020.

Income available for distribution to Unitholders before retention for YTD 2021 was S$68.6 million, 23.9% higher compared to S$55.4 million for YTD 2020.

In anticipation of asset enhancement initiatives and working capital requirements, S$5.5 million of the income available for distribution has been retained for YTD 2021. After cash retention, the amount distributed and to be distributed to Unitholders for YTD 2021 was S$63.1 million.

Commentary

China’s Gross Domestic Product (“GDP”) grew 4.9%1 in the third quarter of 2021 (“3Q 2021”) on a Year-onYear (“Y-o-Y”) basis (compared to +18.3% and +7.9% for the first quarter of 2021 and second quarter of 2021 respectively).

China’s economy grew at the slowest pace since the first quarter of 2021. This could be partially attributed to supply bottlenecks, power shortages, sporadic COVID-19 outbreaks and the debt crisis caused by China’s largest property developer, Evergrande.

In September 2021, the total retail sales of consumer goods reached RMB 3.68 trillion, up 4.4% Y-o-Y, averaging growth rate of 4.9% in two years. From January to September 2021, the retail sales of consumer goods2 reached RMB 31.81 trillion, a Y-o-Y growth of 16.4%.

Chongqing Market Update

For 3Q 2021, no new outlets opened in Chongqing but three retail malls3 entered the Chongqing market. Across the retail market, the vacancy rate increased to 15.5% Quarter-on-Quarter (“Q-o-Q”) mainly attributed to closure of large departmental stores.

China released an ambitious development plan for Chongqing – Chengdu economic circle which will accelerate growth in the western region and facilitate the dual-circulation strategy. This will help form an important growth driver for the western region4.

Hefei and Kunming Market Update

For 3Q 2021, no new outlets opened in Hefei and Kunming. We continued to monitor the performance of existing outlets closely and through our proactive and experienced ground team with strong operational capabilities and domain knowledge, adjust our trade mix and promotional activities to capture new trends in the consumer preferences.

China’s COVID-19 and Policies Update

According to official data5 , China has administered over 2.3 billion vaccine doses, fully inoculating more than 70% of its population. That puts China close to the top of league table in global vaccination, ahead of Japan, South Korea and Australia, as well as vaccination champions, the United Kingdom and United States. Nevertheless, China maintains strict border control and mobility restrictions. It has been locking down cities and rural areas whenever there is a confirmed case, limiting the number of flights from overseas and imposing lengthy quarantine periods of up to three or four weeks on inbound travellers. International flights to China were down over 90% in September 2021 compared to pre-pandemic levels, according to Cirium, an aviation data and analytics company.

The success of China’s zero-tolerance strategy for COVID-19 has laid a solid foundation for China's fight against the epidemic in any future outbreaks. However, the containment comes at a price, slowing the return to a normal way of life for cities affected by any outbreaks. We do not expect the Chinese government to ease up for another year. Fortunately for Sasseur REIT, the cities where the outlets are located, life and businesses continue as usual with minimal disruption.

China’s recent campaign to clamp down on industries ranging from steel to education to property has sent jitters around the global financial markets and curbed the outlook for growth in the world’s second-largest economy6. President Xi Jinping said China will strive to complete major economic and social development targets set for this year, while maintaining strict virus controls7.

China's economic growth used to rely on expanding its domestic manufacturing base mainly through exports. However, this development model has been difficult to sustain when overseas demand decreases due to the COVID-19 situation. This will result in a surplus of inventory. Therefore, it is pertinent for the Chinese government to shift its focus on exports to creating a domestic consumption economy for continued growth, known as ‘dual circulation’. We opined the recent roll-out of various policies is to fine-tune the domestic imbalance in the economy and society. This will put China in a stronger position to plug into the world economic system with a large domestic base.

Sasseur REIT’s outlets are well-positioned to benefit from China’s shift to improving the domestic consumption. The core business of our outlets is unlikely to be severely affected by international events. However, we are closely monitoring the risk factors which may affect our outlets business and adjust our strategies accordingly. Some of these external risks include slower China’s GDP growth which may lower disposable income which in turn may slow down retail sales growth. Furthermore, the risk of rising COVID-19 cases from nearby cities could affect our outlets operations.

1,2 National Bureau of China’s Statistics Press Release dated 18 Oct 2021

3 Starlight 68 Plaza B, Fosun International Centre and Joy Fun

4 South China Morning Post dated 22 Oct 2021

5 https://news.qq.com/zt2020/page/feiyan.htm?isnm=1&chlid=news_news_top&qimei=c6efdf367fd584f6&devid=c6efdf367fd584f6&shareto=wx#/

6 Bloomberg dated 26 Aug 2021

7 People’s Daily dated 26 Aug 2021