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Analysts Impressed By CRT’s Malls; Potential 20% Upside
Aspire, Hot Picks | 10 April 2015
By: Raymond Leung
Articles (142) Profile

Analysts' updates on Croesus Retail Trust as at 10/04/2015

Analysts from three different research houses were invited by Croesus Retail Trust (CRT) to visit their Japan properties. The research analysts visited a total of five malls and were impressed, the two notable ones being Mallage Shobu and One’s Mall.

Mallage Shobu

Source: Mallage Shobu, Croesus Retail Trust

The mall was opened in the midst of the Global Financial Crisis in 2008, which caused rentals to be suppressed. However, the asset enhancement initiatives taken by the management will add significant value to investors.

Asset enhancement works have been completed in Mallage Shobu and is undergoing a major tenant renewal exercise. 155 out of 242 tenants will have their leases expire in 2015 and a strong positive rental reversion can be expected from these leases.

One’s Mall

Source: One’s Mall, Croesus Retail Trust

One’s Mall is the latest addition to CRT’s portfolio. The property was acquired in October 2014 with an initial Net Property Income (NPI) yield of 5.8 percent and occupancy of 99.3 percent.

A potential upside may come from One’s Mall as it is very likely for the mall to achieve positive rental reversion. This is due to the fact that the current market rate for malls in the area is 20 to 30 percent higher than the current rate to tenants at One’s Mall.

If the management decides to proceed with an asset enhancement scheme, the rental upside of the property will be even higher. It will also attract more tenants from a wider variety of businesses to offer more products and services compared to the current anchor tenants.

Impact Of Rising Interest Rates

In view of the rising interest rates that affect REITS, investors should remain cautious. This will essentially cause the costs of debts to be raised, bringing cost pressure on loans. In addition, the rate of real return will be lowered as the risk free rates will be higher.

Analysts’ Recommendations

Analysts who visited the sites in Japan all gave CRT a “Buy” call. RHB Research in particular, believes in a potential upside of 22.3 percent, citing higher rental rates due to Abenomics.

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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