Croesus Retail Trust (CRT SP) BUY (TP: SGD1.15) - DMG OSK 29-Aug-14 Resilient Japan Play FY14 was a good year for CRT. Revenue was in line with our estimates but NPI outperformed by 4.8%, resulting in a DPU of SGD8.98 cents, 6.3% above the REIT’s initial forecast. We expect potentially positive Shobu rental revisions and potential acquisitions of more Japanese malls to drive DPU growth. We like CRT’s stability and expect it to maintain a close to 8% dividend yield at the current price. Maintain BUY and SGD1.15 TP. FY14 DPU outperforms. Croesus Retail’s (Croesus) FY14 revenue was in line with estimates, while net property income (NPI) was 4.8% better than initially forecast due to savings in property management and repair expenses despite an increase in utility expenses, as well as extra sales and promotion expenses to boost store traffic at Mallage Shobu. As a result, income available for distribution for FY14 was JPY3.18bn, representing a full-year dividend of SGD8.98 cents, exceeding forecasts by 6.3%. This represents close to an annualized yield of 7.8%. Rental revisions at Shobu on track. Management has confirmed that rental revisions are on track and positive rental revisions range from +3% to +300%, depending on the outlet size. From our research during our visit to the sites in Japan, we estimate that 55% of the expiring leases are likely to be replaced with new tenants while 25% may be renewals by existing tenants. Overall, we estimate a positive rental revision of at least 15% for the 148 expiring leases. We also expect management to bring in reputable brands like American Eagle, or possibly H&M, with which it has a strong working relationship, to improve the traffic flow at Mallage Shobu. Maintain BUY and SGD1.15 TP. FY14 was a good year for Croesus, for which we expect earnings to remain resilient and provide an 8% dividend yield going forward. The key growth drivers are rental revisions at Mallage Shobu and potential acquisitions of more retail malls in Japan. The REIT incorporated Durian TMK in June, and we think there is a high probability that there may be an acquisition in the near future, judging from past patterns. Management has guided that any acquisitions would be neutral/yield accretive to Croesus. We continue to like the REIT. Maintain BUY and SGD1.15 TP.
Posted on: Sun, 31 Aug 2014 02:25:24 +0000
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