Croesus Retail Trust - RHB Invest 2016-11-14: Focusing On AEIs Going Forward

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CROESUS RETAIL TRUST S6NU.SI

Croesus Retail Trust - Focusing On AEIs Going Forward

• Since listing, CRT has focused on increasing its portfolio which had been successful. 
• Going forward, we understand that the company would likely shift its focus to cost savings initiatives such as lowering cost of debt by refinancing and from internalisation of its asset manager. 
• In addition, CRT would also focus on AEIs to improve rental income from its retail malls. As a result, we expect a low probability of equity placement exercises in the next two years. 
• We like CRT for its earnings stability and high dividend yield. Maintain BUY with a TP of SGD0.96 (12% upside).

Shifting focus to cost savings and AEIs to enhance DPU growth. 

• Going forward, we understand that Croesus Retail Trust (CRT) would likely shift its focus to cost savings initiatives such as lowering cost of debt by refinancing and from internalisation of its asset manager. 
• In addition, CRT is also expected to focus on asset enhancement initiative (AEIs) to improve rental income from its retail malls. Management expects DPU to increase between 20-30% in the next few years from successful implementation of these initiatives, which would be more DPU accretive than an acquisition. 
• These initiatives should also provide more stability to its share price and lower the probability of equity placements going forward.

Better forex hedges to aid DPU, especially in FY18F. 

• In terms of macroeconomic outlook, Japan’s negative interest rate environment would likely lower CRT’s average cost of debt and generate substantial cost savings for the company when it refinances its debt. 
• Furthermore, CRT has an average forex hedging rate of SGD/JPY 83.57 for FY17F and SGD/JPY 76.39 for FY18F, representing a 10% DPU increase just from forex hedges alone.

Key risks. 

• A slowdown in retail spending 

Maintain BUY. 

• Going forward, we are expecting higher rental revisions for several of its properties such as Asahikawa, Saga and Torius, especially since current rental rates are fairly subdued. 
• We like CRT for its earnings stability and high dividend yields. 
• Maintain BUY with a slightly higher DDM-backed TP of SGD0.96 (previous SGD0.93).

Jarick Seet RHB Invest | http://www.rhbinvest.com.sg/ 2016-11-14

RHB Invest SGX Stock Analyst Report BUY Maintain BUY 0.96 Up 0.930