CROESUS RETAIL TRUST
S6NU.SI
Croesus Retail Trust - In a holding pattern for now
Weighed by investor concerns.
- We maintain our HOLD recommendation with a revised TP of S$0.86.
- While CRT offers an attractive 8.7% FY16F yield, we believe a re-rating faces several headwinds including
- Singapore-based investors' unwillingness to accept CRT’s higher-than-average gearing of 46-47% despite its structure as a business trust and the ability of the properties to support higher gearing limits, and
- the overhang from weaker JPY on DPU (estimated FY15 SGD/JPY hedge rate of 81 vs c.85 in FY16F) and potential further devaluation of the JPY should the Bank of Japan (BOJ) initiate a new round of quantitative easing to counter the slowing GDP growth and inflation in Japan.
Boost from renewal of Mallage Shobu and acquisition of Torius property.
- Over the coming year, CRT should benefit f property. rom
- the renewal of Mallage Shobu which resulted in double-digit rental reversions,
- the full-year contribution of the One’s Mall acquisition in late 2014, and
- the recent JPY8bn (c.S$95.2m) acquisition of Torius property in Fukuoka on a 7.8% NPI yield.
Medium- term upside potential from AEI.
- Over the medium term, CRT should also receive a boost from potential AEI and/or tenant remixing at One’s Mall and Torius Mall. This is in addition to any further potential acquisitions.
Valuation:
- After incorporating the Torius property acquisition and the 22 for 100 rights issue at S$0.61 per unit, we cut our FY16-17F DPU by 3-7% and lowered our DCF-based TP to S$0.86 from S$0.92.
- With limited upside to our revised TP, we maintain our HOLD recommendation.
Key Risks to Our View:
- The key risks to our neutral view include:
- stronger JPY versus SGD,
- lower-than-expected take-up of its DRP (we have assumed 25% take-up),
- better-than-expected uplift in rents, and
- further DPU-accretive acquisitions.
Mervin Song
DBS Vickers
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Derek Tan
DBS Vickers
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http://www.dbsvickers.com/
2015-11-12
DBS Vickers
SGX Stock
Analyst Report
0.86
Down
0.92