2 Things Investors Should Know About Dasin Retail Trust’s Projected 9% Distribution Yield

Singapore’s stock market welcomed a new real estate investment just two weeks ago when Dasin Retail Trust (SGX: CEDU) got listed.

The REIT, which currently has a portfolio of three retail malls in China, may have attracted the attention of investors seeking high yields. According to data from its IPO (initial public offering) prospectus, Dasin Retail Trust has a projected distribution yield of 9% based on its listing price of S$0.80 per unit and distribution for its fiscal year ended 31 December 2018.

This is a high yield, especially when considering the fact that the SPDR STI ETF (SGX: ES3) has a yield of only around 3% at the moment. The SPDR STI ETF is an exchange-traded fund that tracks Singapore’s stock market barometer, the Straits Times Index (SGX: ^STI).

Here are two things investors should know about this high projected yield of 9% that Dasin Retail Trust has:

1. The REIT’s projected distribution of 7.20 Singapore cents per unit for 2018 is based on the assumption that it will complete its acquisition of the Shiqi Metro Mall by 30 June 2017. Dasin Retail Trust already has a deal in hand to buy the mall, but should anything happen to derail the acquisition, the REIT’s future distributions would be affected.

Dasin Retail Trust’s IPO prospectus mentioned that 2018’s projected distribution of 7.20 cents would fall to 6.10 cents in the event that the acquisition does not materialise. A distribution of 6.10 cents at the REIT’s listing price of S$0.80 would equate to a projected yield of 7.6%.

2. Two of Dasin Retail Trust’s major unitholders have agreed to not receive distributions for some of the REIT’s units they own. The forgone distributions would go to the REIT’s other unitholders instead. This has a big role to play in allowing Dasin Retail REIT to post a high projected distribution yield of 9%.

Without the distribution waiver in FY2018, Dasin Retail REIT’s distribution per unit would fall to just 3.78 cents from 7.20 cents, resulting in a forward yield of just 4.7% at the REIT’s listing price. The number of units that are under the distribution waiver programme would steadily decline over the years based on the schedule shown below:

Dasin Retail Trust Distribution Waiver table
Source: Dasin Retail Trust IPO prospectus

According to Dasin Retail Trust’s prospectus, the REIT’s unitholders had agreed to forgo some of their share of the distribution because two of the malls in the REIT’s portfolio are still young and need time for their performance to stabilise.

It’s worth noting that the distribution waiver is a form of income support. Investors in Dasin Retail Trust should watch for the REIT’s ability to grow the rent its malls receive. If the growth is not sufficient to make up for the tapering of the number of units under the distribution waiver programme, minority unitholders of the REIT would have to stare at the prospect of getting lower distributions on a per unit basis over the next few years.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Chong Ser Jing doesn't own shares in any company mentioned.