Dasin Retail Trust ("Dasin") made a shocking announcement on Sunday (20th March 2022) that it has entered into a non-binding memorandum of understanding ("MOU") with Wuhu Yuanche Bisheng investment Centre ("Purchaser") to explore the sales of Shiqi Metro Mall and Xiaolan Metro Mall in Guandong Province. This was a big surprise to me as instead of announcing whether the current syndicated loan (that has expired on 19th March 2022) has been extended for another 3 months, it went on to announce this first. Anyway, this is a sure sign that the syndicated loans bankers must have some serious concern on the entire Dasin for them to be only willing to give short-term extensions for the past 2 rounds and after another 3 months, no progress has been made. I will put up some points to take note of here on the various uncertainties still plaguing Dasin in spite of the upcoming sales of investment properties to raise cash for loan repayment.
1. Syndicated bank loans default and unit-holders still entitled to the payout on 30 March 2022?
The key issue currently is whether Dasin Retail Trust is in default of bank loans. A default will mean that the distribution being declared for 2nd half FY2021 cannot be paid out on 30 March 2022. Bank loans usually have extra terms and conditions imposed on the entity upon default. This is exactly what had happened to the last distributions which were being withheld due to objection by the bankers of the demised Eagle Hospitality Trust.
This pertinent question went unanswered as at 22 March 2022, 10.15am. I am flabbergasted by the lack of inquiries by our SGX regulatory team and have written in to SGX to raise my concern on the lack of transparency and the lack of prompt disclosure by the management team of Dasin.
2. Sales proceeds to be use to repay Dasin's existing syndicated loans and working capital.
The net proceeds from the sale of the properties shall be used to repay the Trust's existing syndicated loans and the remainder if any for working capital purposes. The million dollar question here are:
(i) What is the sales price of the 2 properties given the seemingly urgency to offload them?
(ii) How tight is the timeline to repay the syndicated bank loans? Till now no disclosure by the management of Dasin.
3. Why sell 2 properties? Isn't the syndicated loans due only S$500 Mil?
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| Extract of Loan Payable Summary from 31 Dec 2021 FS |
The bad news here is that while S$499.5Mil of bank loan is already due, another S$105.7Mil is due in September 2022; S$132.9Mil is due on 15 July 2022 and another S$17.6Mil due on 28 September 2022.
Hence a total of S$755.7Mil of loans are either already due or due within 6 months. Dasin needs to sell at least 2 properties urgently to get out of the loan default mess.
4. Estimated sales proceed from divestment of the 2 malls
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| Extraction from valuation report from Jones Lang Lasalle |
The total valuation of Xiaolan Metro Mall and Shiqi Metro Mall are RMB4,836,700,000 (S$1,015Mil).
Since it was mentioned in the recent MOU announcement that the Purchaser will grant Dasin put option for shares in the Special Purpose Vehicle created to acquire the 2 properties, I presume an estimated S$760Mil will be in hard cash so as to repay the bank loan while the remaining S$255Mil will be in a mixture of shares and cash to Dasin.
Parting thoughts
Overall, Dasin may end up in a distressed sales of not just 2 malls but perhaps all of its shopping malls at firesales price if the above divestment does not go through. Personally, I thought that the new Trust Manager, Sino-Ocean, seems to have done a lot to prevent a firesales of Dasin's investment properties by tapping on its networking to arrange a suitable deal. At the same time, I am apprehensive of the reason why Sino-Ocean did not propose a direct capital injection into Dasin with its partner but instead come up with such a financing structure. I smelled a rat somewhere which Sino-Ocean and the syndicated bankers are not revealing on why the syndicated bank loans failed to be renewed for the longer term of 2 to 3 years.
Last but not least, Dasin is trading at just 0.225 times of its net asset value of S$1.40 as at 31 December 2021. So if the above deal pulls through at a close enough price to the Jones Lang Lasalle valuation, it is tantamount to the unlocking of a huge potential upside for existing unit-holders. Of course, whether Dasin is investible or on its final death bed at this juncture is an enigma by itself....so beware.
P.S: Please see my previous posting on Dasin Retail Trust
1. Dasin Retail Trust 15.4% Distribution Yield Per Annum- Typical Value Trap Or A Hidden Gem?- 12 March 2022
Hi Investor, not exactly sure as Dasin only produced a consolidated financial statement. Unfortunately the individual Profit and Loss of the 7 malls individually are not provided. However, perhaps we can use the property valuation as a proxy to the income....Shiqi Metro and Xiaolan Metro made up about 43% of total valuation. Let's be conservative and take a 50% haircut in view of both malls having a relatively high occupancy rates relative to the remaining malls a certain costs cannot be cut proportionally, DPU will drop by 50%. The yield is likely to be around 6.5% per annum based on previous distribution. If based on free cashflow, then distribution yield maybe only 3.2% per annum based on current unit price of S$0.315 per unit.
ReplyDeleteInteresting to see that DBS was one of the underwriters for this IPO.
ReplyDeleteHmmm, yup, DBS affiliate also took part in the listing of the demised Eagle Hospitality Trust. Anyway, DBS did many IPOs. So bound to have a few rotten eggs that do not turn up well perhaps.
ReplyDeletePersonally, the high valuation on the 7 properties given in the latest valuation report is a big question mark especially if this whole thing disintegrates into a fire-sales. If distressed sales happens, they have to sell not just 2 properties but 4 properties and the domino chain effect will happen. If a 50% drop happens, it will be game over for all unit-holders.