Croesus Retail Trust - CIMB Research 2017-06-28: Proposed Privatisation Offer By Blackstone At S$1.17

CROESUS RETAIL TRUST S6NU.SI

Croesus Retail Trust - Proposed Privatisation Offer By Blackstone At S$1.17

Blackstone Group has offered to take Croesus Retail Trust (CRT) private at S$1.17/unit.
The offer price is 38% above 12-month VWAP and at a 23% premium to the Mar 2017 book value.
Unitholders will be entitled to 4.06 Scts of permitted distributions if the effective date falls on or before 31 Oct 2017.

In our view, the offer at 5% implied FY17F annualised NPI yield seems fair and we would advise unitholders to accept the offer. Maintain Add.

CRT has received an offer from Cyrus BidCo Pte Ltd, controlled by private equity firm Blackstone Group, to acquire all the issued units in CRT, by way of a trust scheme, in compliance with the Singapore Code of Takeovers and Mergers.
The scheme consideration price of S$1.17/unit is at a 38% premium to the 12-month VWAP and 23% and 31% above the Mar 2017 book NAV (which takes into account the market values of the properties of CRT as at Jun 2016) and Mar 2017 NTA, respectively.

The acquisition is conditional upon obtaining:
1. the approval of unitholders holding not less than 75% of voting rights, in person or by proxy, for an amendment in the trust deed, and
2. approval of more than 50% of the number of the unitholders representing at least 75% in value of the units held by unitholders present and voting, in person or by proxy, for the scheme. Court and other regulatory approvals are required as well.
Once the scheme is effective, CRT will be delisted. Blackstone currently holds 5.03% of CRT.

Apart from the scheme consideration, unitholders will be entitled to a ‘permitted distribution’ of S$31.3m (4.06 Scts) as dividends for the period 1 Jan 2017 to effective date, if the effective date falls on or before by 31 Oct 2017, and up to 90% of CRT’s distributable income for the period from 1 Nov 2017 to effective date, if the effective date falls after 31 Oct 2017.
This translates to an all-in consideration of S$1.21/unit.

The offer price of S$1.17/unit translates to an implied 5% annualised FY17F NPI yield compared to its present book NPI yield of 5.7%. We think the implied NPI yield is fairly in line with current market transaction levels.
We think this offer seems fair and advise unitholders to accept the offer.
We raise our TP from S$0.98 to S$1.17 as we move from a DDM to a break-up value methodology.
Pending the issuance of the offer documents and completion of the transaction, we maintain our Add call.
Risks to our view could be non-completion of the transaction, which would lead to share price weakness.

LOCK Mun Yee CIMB Research | YEO Zhi Bin CIMB Research | http://research.itradecimb.com/ 2017-06-28

CIMB Research SGX Stock Analyst Report ADD Maintain ADD 1.17 Up 0.980