Croesus Retail Trust

Croesus Retail Trust (S$0.825) : Flat 1QFY16 DPU due to unfavorable FX hedge but still offers 10% yield

Croesus Retail Trust (CRT) 1QFY16 DPU came in flat at 2.08¢ due to forward FX contracts hedge on SGD/JPY, while distributable income grew 16.1% y/y to ¥918m.

Revenue rose 17.2% to ¥2,007m, largely on the acquisition of One’s Mall on Oct '14 and positive rental reversion from Mallage Shobu. NPI climbed slower to ¥1,232m (+10.7%), dragged by ballooning expenses from building management (+57.3%), repair (+73.2%), and sales & promotion (+41%).

Excluding Torius, a retail property in Fukuoka acquired in Oct ’15, CRT’s portfolio occupancy dipped 0.7ppt q/q to 98.6% with a weighted average lease expiry of 8.6 years.

Aggregate leverage stood at 47.6% and this leaves an additional debt headroom of ¥30.4b for future expansion given a 60% leverage limit. Average debt cost and debt tenor were 1.98% and 2.6 years respectively.

Despite plans of lowering distribution to 90% after FY15, the retail landlord extended its commitment to pay out 100% of distributable income up till FY16.

Moving forward, management continues to seek further acquisition opportunities for growth and also minimise currency risk by hedging close to 100% of distribution to unit holders up to Jun ’17.

CRT currently offers a 10.1% distribution yield and trades at 0.9x P/B.