Croesus Retail Trust - RHB Research 2015-09-30: Looking To Acquire Torius Property

Croesus Retail Trust - RHB Research 2015-09-30: Looking To Acquire Torius Property CROESUS RETAIL TRUST S6NU.SI 

Croesus Retail Trust - Looking To Acquire Torius Property

  • Croesus Retail Trust (CRT) intends to acquire Torius Property in Japan’s Fukuoka Prefecture for SGD98.8m. It represents a NPI yield of 7.8% and will be funded mainly by a 5-year 0.95% specified bond of JPY4bn – as well as gross proceeds of SGD69.7m from underwritten and renounceable 22 rights units for every 100 existing units at SGD0.61/share. 
  • With a mildly accretive acquisition and the 22% dilution, we maintain BUY with a lower DDM-backed TP of SGD0.93. 


 36 independent buildings at a go. 

  • Torius Property, located in Japan’s Fukuoka Prefecture, comprises 36 independent buildings with distinctive open-style architecture and comes with a 4,200-lot capacity carpark. It has a total of 145 tenants. Key tenants include Costco, Nafco, Daiso, GU and United Cinema. The 205,543 sq m parcel of land is under a lease until 9 Feb 2060 and has a net leasable area (NLA) of 77,032 sq m, accompanied by a WALE of 6.8 years. 
  • In addition, approximately 30% of its gross proceeds are made up of variable sales, while the rest are fixed monthly rentals. Its tenant sales for the past five years have been quite stable, at around JPY24.5bn-26bn a year. 

 Gearing drops to 46.5%. 

  • The REIT will fund this JPY7,997m acquisition via: 
    1. a 5-year 0.95% specified bond of JPY4bn, 
    2. gross proceeds of SGD69.7m from underwritten and renounceable 22 rights units for every 100 existing units at SGD0.61/share, as well as 
    3. a JPY600m consumption tax-specified bond. 
  • Its gearing will also decrease to 46.5% from 47.3%. 

 DPU impacted by only partial contribution from Torius Property. 

  • As Torius Property would only contribute 8.5 months (in numbers) to CRT’s FY16, despite an additional 22% potential dilution for the same period, the latter’s distribution per unit (DPU) may be temporarily pressured before normalising in FY17. We still expect a DPU of about JPY6.38 cents for FY16, implying an attractive dividend yield of 9.1% at current levels. 
  • In addition, due to current market conditions, we conservatively adjusted for a higher risk-free rate as well as a higher beta. 
  • As a result, our DDM-backed TP drops to SGD0.93 from SGD1.10. 
  • With an attractive FY16F yield of 9.1%, asset enhancement initiative (AEI) possibilities and potential rental reversions after 3.3 years for this new mall, we maintain our BUY recommendation on the stock.


Jarick Seet RHB Securities | http://www.rhbgroub.com/ 2015-09-30
RHB Securities Analyst Report BUY Maintain BUY 0.93 Down 1.10


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