Wednesday, 13 October 2021

Dasin Retail Trust Bounced Back To Life with 22% Valuation Improvement- Will It Survive the Debt Crisis With Sino-Ocean Capital Taking Over As New Trust Manager?

Dasin Retail Trust ("Dasin") has been on a roller coaster ride since my last posting on 18 September 2021. When Dasin made a shocking announcement on 28th September 2021 that its half year distribution payment has been postponed to 4th October 2021 instead of 28 September 2021 itself, this sparked off a fierce selling frenzy by many unit-holders to get rid of their units fearing the worst had happened. The SGX regulator  immediately raised a query to ask Dasin to give more detailed clarifications with regard  to the actual reason for the delay. Price at one point dropped to  S$0.380 per unit from S$0.415 per unit.  Dasin's NAV as at half year reporting was S$1.46 per unit. It was totally disastrous as Dasin entered into one of its darkest chapters since its listing on SGX.  

1. Dasin Management team should have planned better for the half yearly distribution and not caused market panic
The false alarm started with Dasin management team being extremely secretive on the reason for the delay other than it was due to "technical issues" delay on 28 September 2021. The mind blogging term "technical issues" thus lead to widespread panic as investors feared that either Dasin has run out of cash or some bank facilities covenants has been breached which led to immediate default with bankers closing in. 

It was only after SGX regulator started querying before Dasin management came out to explain (on 1st October 2021) that the delay was due to COVID-19 measures that slowed down the verification work from a bank in Macau that was transferring funds back to Singapore.

2. Dasin bounced back with Sino-Ocean Group (listed on HKE) taking over as the new Trust Manager
On 12th October 2021, Dasin announced the successful completion of sales of shares of the Trust's manager from the Founder, Mr Zhang Zhencheng to Sino-Ocean. Sino-Ocean. Capital’s businesses include real estate investment, private equity investment, structured investment, strategic and innovative investment. It has clinched numerous awards such as “Top 10 Best Investment Institute (Real Estate Industry)”, “Top 10 Real Estate Fund Management Institute”, “Best Real Estate Equity Investment Institute”. As at the end of 2020, its assets under management exceeds RMB 133.2 billion.

With the financial backing and reputation of Sino-Ocean Group, the risk of non-renewal of offshore bank loans by the syndicated banks to Dasin has been significantly (albeit probability of non-renewal is still existent) reduced. As a result, Dasin roared back to life on 13th October 2021 with prices hitting intra-day high of S$0.580 per unit at one time. Its price has since gone down to S$0.470 per unit. Nevertheless, this is still an impressive 22% surge in market valuation within 3 weeks.  

3. Parting thoughts
The next step for the new Trust Manager, Sino-Ocean, would be to engage the bankers with regard to the final negotiation for the S$500Mil bank loans that are due for repayment by 19th December 2021 which lead to a current ratio of less than 1 for Dasin. If the long term banking facilities renewal hurdle is cleared, I reckon that there is a potential upside of 40%-50% increase in unit price back to S$0.70 per unit, which was the price before the sudden collapse from 16th June 2021 onwards due to the impending repayment date of the offshore borrowings expiring on 18th July 2021 at that juncture (it was eventually extended but only till 19th December 2021). Saying that, many investors are still scarred by the bad track record of previous S-chips listed on SGX. 


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