SINGAPORE (Feb 15): CIMB Research is maintaining its “add” call on Croesus Retail Trust (CRT) with an unchanged target price of 98 cents, following a strong quarter where the REIT reported a 5.2% DPU increase to 1.81 cents for 2Q17.
(See also: Croesus Retail Trust’s 2Q DPU rises 5.2% to 1.81 cents)
“CRT offers investors strong DPU visibility as its distribution income is hedged till Dec 2018 at SGD/JPY exchange rate of 83.57-71.05. In addition, potential cost savings from debt refinancing could provide further earnings uplift, which we have not factored into our present forecast,” comment analysts Lock Mun Yee and Yeo Zhi Bin in a report on Tuesday.
That being said, the analysts believe asset enhancements and cost savings from CRT’s recent internalisation exercise are likely to continue driving its DPU growth.
In terms of asset enhancement, CRT is looking to enhance its Torius property over the next 1-2 years, and is also in the process of negotiating with potential tenants for its new annexe. Additionally, the trust intends to embark on phase 2 of its asset enhancement initiative (AEI) at Feeal Asahikawa, and will continue to seek tenants from neighbouring department stores in addition to the 20.9% of leases to be re-contracted in FY17-18.
Lock and Yeo think CRT also stands to benefit from further interest cost savings, given “still-low interest rates in the near term” as the trust looks to refinance JPY 32,649 million of loans due in FY18-19.
“The trust’s gearing stands at 46.1% as at 2QFY17, within its target range of 45-50%. As such, we think any acquisitions could likely be funded via debt and equity,” observe the analysts.
As at 12.35pm, units of CRT are trading flat at 87.5 cents.
