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Abenomics: A Boon Or Bane To Croesus?
Tradeable, Tradeable Ideas | 05 September 2014
By: Raymond Leung
Articles (142) Profile
  1. Croesus Retail Trust (CRT) recently announced stellar FY14 results that beat expectations even as 4Q14 revenue disappointed.
  2. Contributions from recent property acquisitions as well as an increase in utilities income helped to bolster performance.
  3. CRT’s debt profile is fully hedged from any possible interest rate hikes, effectively shielding investors from adverse financing costs in the near future.

Analysts' updates on Croesus Retail Trust

Last week, Croesus, a trust which invests in Japanese retail properties announced its 4Q14 and first full year results.

Gross revenue for 4Q14 was 0.9 percent lower from the forecast due to the lower sales by its tenants in Mallage Shoubu. It is the only mall in its portfolio that has a variable component dependent on sales. Higher sales tax introduced by Japanese Prime Minister, Shinzo Abe, is the main cause for the overall decrease in national retail consumption.

Net property income (NPI) for the quarter managed to top forecast by 2.6 percent as the rental for the malls (other than Mallage Shoubu) were on a fixed basis. Therefore, the NPI of Croesus was not affected by the strong headwind faced by retailers in Japan. Contributions from the properties acquired earlier this year (March 2014) and an increase in utilities income was cited as the main boosters of the higher NPI.

Distribution per unit (DPU) for 4Q14 beat forecast by 2 percent while DPU for FY14 surpassed by 6.3 percent. A total of $0.0898 was declared for FY14 which will bring the annualised yield to 9.12 percent (based on 2 September 2014 closing price of $0.985). Croesus is currently trading cum dividend of $0.0374 with an ex-distribution date on 8 September 2014.

Investors need not worry about the impending interest rate hike for Croesus as its debts are 100 percent hedged with an average fixed interest rate of 2.13 percent. The weighted average maturity for Croesus’ debts is 3.7 years and will avoid FY15/16 (the turbulent years for interest rate).

Gearing ratio for the trust stood at 51.7 percent as of 30 June 2014, hence giving Croesus a headroom of JPY16.2 billion before it reaches the limit of 60 percent. This will provide Croesus with enough capital to purchase new properties from its sponsor’s strong pipeline, which is a potential upside for the trust.

Analysts from four different research houses unanimously gave Croesus a “Buy” call in view of the reflating retail properties from Abenomics. The four analysts gave Croesus a potential average upside of 15.74 percent.

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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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