Croesus Retail Trust - RHB Invest 2016-08-29: A Better FY17F Ahead

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CROESUS RETAIL TRUST S6NU.SI

Croesus Retail Trust - A Better FY17F Ahead

• With full accretion from its recently-made acquisitions, cost savings from the internalisation of its asset manager as well as lower refinancing costs for its debt, we expect Croesus Retail Trust (CRT) unitholders to enjoy an attractive dividend yield for FY17. 
• We also expect it to continue to make accretive acquisitions to further boost its portfolio. 
• CRT announced a DPU of 7.06 cents for FY16 (Jun), being impacted by a rights issue as well as the preferential share offering without the full accretion of its newly- acquired properties. 
• Maintain BUY, with a SG0.93 TP (8% upside) 

Several positive boosts for FY17. 

• CRT’s FY16 DPU was impacted by the rights issue offering as well as the preferential share offering without the full accretion of its acquisitions. The full accretion from its acquisitions done recently, coupled with the cost savings from the internalisation of its asset manager as well as lower refinancing costs for its debt will likely boost its FY17F DPU. 
• All in all, we expect it to record a dividend yield of 10.6% in FY17.

Better forex hedges to aid DPU, especially in FY18. 

• In terms of macro- economic outlook, Japan’s negative interest rate environment will likely continue to bring CRT’s average cost of debt down and generate substantial cost savings when it refinance its debt. 
• Furthermore, CRT has an average forex hedging rate of SGD/JPY83.57 for FY17F and SGD/JPY76.39 for FY18F, representing a 10% DPU increase just from forex hedges alone.

Key risks. 

• A slowdown in retail spending and continued depreciation of the JPY.

Maintain BUY. 

• We expect CRT shareholders to enjoy an attractive dividend yield for FY17. Going forward, we also expect its management to continue to make accretive acquisition to boost its portfolio. 
• With a proven and good track record generated so far, we remain confident of the pipeline ahead and maintain BUY on the stock with an unchanged DDM-backed TP of SGD0.93.

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-08-29

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.930 Same 0.930