Croesus Retail Trust - RHB Invest 2015-11-12: Torius Coming Only In 2QFY16

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CROESUS RETAIL TRUST S6NU.SI 

Croesus Retail Trust (CRT SP) - Torius Coming Only In 2QFY16 

• CRT reported positive 1QFY16 (Jun) results, with gross revenue up 17.2% YoY and NPI rising 10.7% YoY – in line with our FY16 estimates. 
• With an attractive 9% FY16F yield, we maintain BUY with a DDM-backed TP of SGD0.93 (14% upside). 
• 1QFY16 DPU came in at 2.08 SG cents. 
• Going forward, DPU will temporarily be hit negatively before normalising in FY17 as CRT would book only 8.5 months of contribution from the Torius property, with a further 22% dilution for FY16. 

 A steady 1QFY16. 

• Croesus Retail Trust (CRT) reported a 17.2% increase in gross revenue to JPY2,006.6m in 1QFY16 from JPY1,712.5m in 1QFY15. 
• Net property income (NPI) for 1Q16 was higher at JPY1,232.8m, (+10.7% YoY). 
• A distribution per unit (DPU) of 2.08 SG cents was declared for 1QFY16, as the financial effects from the acquisition of Torius, as well as the rights issue, would only be realised from 2QFY16 onwards. 
• In addition, management has also highlighted that the majority of the DPU for FY16F and FY17F has been well-hedged at JPY85.03 and JPY84.16 respectively for every SGD1.00. 

 Torius – rental revisions and AEIs in FY17. 

• Management is currently still planning potential asset enhancement initiatives (AEIs) and rental revisions for its recently-acquired Torius property. We can most likely expect a rental uplift from tenants whose leases expire in 2016 as Torius average rentals are around JPY5,000/tsubo, while the average rents in surrounding suburban malls are between JPY6,000/tsubo and JPY8,000/tsubo per month. 

 DPU impacted by only partial contribution from the Torius property. 

• Due to only an 8.5-month contribution from the Torius property – along with an additional 22% dilution for FY16 – DPU will be temporarily impacted negatively, before normalising in FY17. However, we still expect a DPU of about JPY6.38 per share for FY16, representing an attractive dividend yield of 9% at current levels. 

 Steady trust with an attractive yield. 

• With an attractive FY16F yield of 9%, coupled with AEI possibilities and potential rental reversions in FY17, we maintain BUY on CRT with a DDM-backed TP of SGD0.93. 
• We also like CRT for its stability and defensive suburban assets.

Jarick Seet RHB Research | http://www.rhbinvest.com.sg/ 2015-11-12

RHB Research SGX Stock Analyst Report BUY MAINTAIN BUY 0.93 Same 0.93