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Analysts: Croesus Beats IPO Expectations, Boasts 8.9% Yield
Aspire, Hot Picks | 18 February 2015
By: Raymond Leung
Articles (142) Profile

Analysts' updates on CRT

How Did CRT Perform For 2Q15?
CRT (Croesus Retail Trust) announced its stellar 2Q15 results last week. This is the sixth consecutive time that CRT exceeded expectations since its IPO (Initial Public Offering).

Gross revenue for CRT surged by 51.7 percent year-on-year (YoY) while NPI (Net Property Income) grew by 48.8 percent YoY. This has led to a 3 percent YoY increase in DPU from $0.0202 to $0.0208.

Based on the DPU (Distribution Per Unit) forecast of $0.0189 for 2Q15, the actual DPU results outperformed the forecast by 10.1 percent.

What Contributed To The Strong Performance?
CRT’s strong performance in NPI was due to the acquisition of three new malls in the past year. Luz Omori and Croesus Tachikawa were acquired on 6 March 2014 while One’s Mall was acquired on 16 October 2014. All of the three properties were considered to be accretive acquisitions for CRT.

In addition, the trust was a beneficiary of the rent’s variable component. Its tenants had better sales at Mallage Shoubu, which contributed to the positive results.

CRT's newest acquisition was made at a 5% discount

Income versus Distribution
In 2Q15, DPU increased by a marginal three percent while the NPI increased by 48.8 percent. The huge difference between the NPI and DPU was mainly due to two factors: rising interest rates and dilution of shareholdings.

The Trust’s rising interest rate profile was due to the US$500 million Euro Medium Term Notes that were issued in January 2014. This thus factored into an increased interest cost which ultimately lowered the Trust’s DPU.

Another factor was the dilution of shareholdings because of the issuance of new share units. In September 2014, CRT issued 78.9 million units through private placement. The proceeds of this placement were used to purchase One’s Mall.

The higher NPI had to be divided by the enlarged share base that resulted in only a marginal increase in DPU.

Looking Forward Into 2015
The outlook of the retail sector in Japan remains optimistic as consumption is expected to increase.

This is because the 18-month delay of the second round of tax hikes to April 2017 and the lower prices at the gas pump (due to lower oil prices) might motivate consumers to spend more. Consumer spending sentiments are also recovering as the Consumer Confidence Index started increasing from December 2014.

Furthermore, CRT still has debt headroom of JPY21.4 billion. This will give the management ample liquidity to acquire new properties that will stimulate the growth of the Trust. The acquisition of new properties might result in a share price increase.

What Do Analysts Say?
Analysts from CIMB Research remain confident of CRT and reiterated their “BUY” call with a target price of $1.10. This translates into a possible upside of 18.28 percent.

In addition, CRT shares continue to boast a high yield of 8.9 percent based on the historical annualized yield of $0.0825 and a share price of $0.93. The high yield will give additional incentive to investors and provide some buffer for any possible increase in interest rates.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.


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The Shares Investment editorial team welcomes constructive feedback on our coverage and content. We would also be delighted to answer any questions on the above article. Leave us a comment below, and we'll get back to you shortly!

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