Croesus Retail Trust - RHB Invest 2016-05-16: Full Accretion Of Newly-Acquired Malls Likely In FY17

CROESUS RETAIL TRUST S6NU.SI

Croesus Retail Trust - Full Accretion Of Newly-Acquired Malls Likely In FY17

CRT has announced the acquisition of two new malls, namely Mallage Saga and Feeeal Asahikawa with NPI yields of 9.1% and 5.2% respectively.
Management highlighted that there is rental reversion upside for the latter, from the current average of JPY6,000/tsubo/month to JPY8,000/tsubo/month in its retail section.
In addition, we expect the full accretion of Mallage Saga, Feeeal Asahikawa, Fuji Grand Natalie and Torius in its FY17 earnings.

Maintain BUY and DDM-backed TP of SGD0.93 (12% upside), accompanied by a FY17F yield of 9.9%.

Croesus Retail Trust (CRT) has acquired two new malls, Mallage Saga and Feeeal Asahikawa, with 9.1% and 5.2% net property income (NPI) yields respectively.
Mallage Saga, a large-scale suburban shopping mall, is located in Saga Prefecture’s capital city (northwest of Kyushu) and has a well-diversified tenant mix of 132 tenants in the food & beverage (F&B), interior goods, ladies & men’s fashion and entertainment sectors.
Feeeal Asahikawa is a large-scale shopping centre in Asahikawa City, Hokkaido, with 62 retail tenants comprising food and groceries, fashion and accessories, education services and financial/insurance sectors, and two office tenants.

Currently, the average rental rate for the retail portion (60% of its net leasable area (NLA)) is about JPY6,000/tsubo/month (1 tsubo= 3.3 sq m).
We understand that the current going rental rate around the area is closer to JPY8,000/tsubo/month.
With its short weighted average lease expiry (WALE) of 1.7 years, management is keen to speed up its rental renewal process to increase the NPI yield of this mall.

CRT has distributed 1.86 cents for 3QFY16 and 5.36 cents YTD, reflecting an annualised yield of 8.6% for FY16F.
With the full accretion of Mallage Saga, Feeeal Asahikawa, Fuji Grand Natalie and Torius in its FY17F earnings, we expect a 9.9% dividend yield for FY17.
Key risks are depreciation of the JPY and lower retail sales.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-05-16

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