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Croesus Retail Trust: DPU above forecast at 5.24c.

Friday, February 14, 2014

Croesus Retail Trust did not disappoint as expectations that DPU would come in above forecast has materialised. A DPU of 5.24c for the period of 10 May to 31 Dec 2013 will be paid on 31 March 2014. This means a 6.02% return for anyone who got in at 87c. Not bad.

Some numbers
(as at 31 Dec 2013):

Gearing: 41.8%
Interest cover ratio: 5.9x
All in cost of debt: 1.59%
100% of debt hedged.
Occupancy: 100%
NAV/unit: JPY 74

We could reasonably expect performance to improve in future as more expiring leases in Mallage Shobu, one of the Trust's 4 malls, are replaced with new tenants. Already, two tenant replacements have shown positive rental reversions.

Hopefully, more AEIs will be carried out and AEIs carried out at Aeon Town Moriya brought in new tenants like UNIQLO which bumped up total income.

If we annualise the Trust's last quarter's DPU of 2.02c, we are looking at 8.08c per annum or a distribution yield of 9.29% for anyone who got in at 87c a unit. Further upside is possible as more tenant replacements take place with positive rental reversions this year.

We want to be reminded that Croesus Retail Trust issued a $100 million MTN and that is not part of the numbers for the period reported here. In a blog post last month, I said:

"The hard numbers tell us that finance costs will jump by some 30% because of this S$100 million MTN and unless put to good use it will also reduce DPU by about 5%. So, the funds raised should not be left idle for too long."
Croesus Retail Trust: Overnight BUY order filled.

So, I would also want to see the Trust make a DPU accretive acquisition very soon. Of course, this should mean more distributable income for unit holders.

For anyone who believes that Abenomics will snap Japan out of 20 years of deflation and that Japan's economy will be revitalised, investing in Croesus Retail Trust is a decent enough proposition even at the current price of 90c a unit. This is especially true for anyone who wants a meaningful stream of income from an investment with a good chance of capital appreciation thrown in over the next 2 to 5 years.

See presentation slides: here.

Related posts:
1. Croesus Retail Trust and Perennial China Retail Trust.
2. Added more Croesus Retail Trust.
3. Croesus Retail Trust: Initiated long position at 87c.


Lee Kim Poh said...

Hi AK,
This is my first time writing to you. Page 25 of the presentation of Croesus's Spore Investor Meeting on 13.1.14 stated DPU of 3.26 cents for period 10.5.13 - 30.9.13. DPU for 1.10.13 - 31.12.13 is 2.02 cents. The two add up to 5.28 cents. Why is it 5.24 cents? Thanks.

AK71 said...

Hi Lee,

You did some forensics on CRT? ;p

Yes, you are right but I think it is important to remember that the numbers were probably not audited. Could they have made a mistake? I think you might want to check with CRT directly.

When you have their reply, please share with us. Thanks. :)

Solace said...

Hi AK,

This is off the topic on Croesus Retail Trust.

Frasers Cpt (FCL)has caught my attention recently. It has been spun off by F&N, the real estate division craved off from its operation business.

Latest Net Asset Value per share is $2.15. Currently trading at 1.41 - 1.42. I am vested at $1.41, about 35% discount to its NAV.

Comfortable at holding its assets. Potential catalyst would be the listing of a hospitality reit.

i find F&N hard to value. But for FCL it is more straight forward.

Debt to equity is about 50%. But i think once they spin out the hospitality reit they should be able to move some debt off their books.

Key Risk, FCL could be depressed because of the majority shareholder being the Thai Towkay Chaoren, holding at 76%.

I hope that the Thai Towkay's interests are aligned with minority shareholders.

Woah, so many things to write and think about, potential good material for a Guest Blog? hahaha
What Says You? Lol

AK71 said...

Hi Solace,

You know I am waiting for another guest blog from you. I wait until neck long long already. LOL.

So, FA + guest blogging this weekend? ;)

Unknown said...

Hi! My first time commenting as well! I have actually done up a spreadsheet recently on FCL.. Wonder if I can share with AK and Solace? Not very well done but I hope I can get some comments?


AK71 said...

Hi Jim,

I think Solace might be doing a guest blog for us on FCT. So, you could share the spread sheet with him. :)

Alternatively, you could do a guest blog as well. We can always have two or more guest blogs on the same stock. Variety is good!

However, my blog is not very spread sheet friendly. So, you would have to cut it down to size for me before it can be published. ;)

lzyData said...

About the 5.24 cents issue, it looks like the numbers in JPY terms match. Income available for distribution from 10 May to 30 Sep was reported as 1,139,521,000 yen in the earlier earnings announcement. Income available for distribution from 10 May to 31 Dec and for 1 Oct to 31 Dec was 1,852,529,000 yen and 713,008,000 yen respectively as reported in the most recent announcement. So I believe the small discrepancy arises from using different exchange rates at different times.

AK71 said...

Hi IzyData,

Thanks for this. It makes good sense. :)

Solace said...

Hi AK and Jim

Yes, the more variety the better. i am sure the spreadsheet will show the figures more clearly, do share the spreadsheet with us. Think AK can email me if he is not publishing it?

i will write the guest blog over the weekend, will find sometine to do so, and hopefully can send it to you early nxt week. :)

AK71 said...

Hi Solace,

You guys should get in touch with each other. I am not the one blogging about FCL. No point sending the spreadsheet to me. Just send me the guest blog. ;p

inquisit0 said...

Hello AK,

Do you think it is too late to enter Croesus?

May I ask about some simple investment decisions. For example, if you queue for a counter, if one week never hit, would you still keep queuing till it hits your EP?

I queued Croesus last month and gave up because I didn't get it. Then regretted when it went up so much. Do you know of any strategy to ensure that you get what you queue for?

Newbie here. Appreciate your feedback

AK71 said...

Hi inquisit0,

Well, only you have the answer because only you know why you want to enter. Are you doing this for the passive income? Or are you doing this to punt for a quick gain?

For anyone investing for income, I think that Croesus Retail Trust is still a fairly good investment at current price. :)

Strategy to ensure we get what we queue for? I don't think there is such a thing. It is really a matter of luck. :)

Unknown said...

Hi AK,

Sorry to hijack your comments section. Just wanted to reach out to Solace, my email address is Please drop me a note and I'll send you my "amateurish" spreadsheet?

Unfortunately, my final decision is that I prob would not buy FCL... not sure if you came to the same conclusion....


AK71 said...

Hi Jim,

I would be very happy for the two of you to make contact. I just published the guest blog by Solace a few minutes ago but I am sure you guys could come up with a Part 2. ;)

Unknown said...

Hi AK,

Thanks! Normally, I wouldn't mind writing something but I have an intense fear of being flamed for my ignorance or silly analysis.. :)

I'm very much a closet investor and to be honest, I have been reading your blog for years and this is the first time I have commented!

Anyways, since I have "came out of the closet", I would like to thank you for publishing your wisdom in the past few years.


AK71 said...

Hi Jim,

Thank you for coming out of the closet. ;p

I would like to encourage you to contribute your first guest blog to ASSI.

Hey, we are all amateurs here and if we don't discuss our ideas, how do we learn? :)

AK71 said...

Portfolio occupancy continues to track close to 100% while lease renewals during the quarter, such as Ootoya and Evisu at Mallage Shobu were re-contracted at between 80% and 60% higher than previously.

In addition, tenant sales in 2QFY14 continued to increase on a y-o-y basis.

Aeon Town Moriya (ATM) and Aeon Town Suzuka (ATS) enjoyed 1-1.3% higher tenant sales while Mallage Shobu saw sales performing 7.5% better than last year.

At Luz Shinsaibashi, anchor tenant H&M saw sales improving by 16% y-o-y.

We expect the trust would enjoy positive rental reversions with 25.7% of its leases due for renewal in Nov 2014. These are largely at Mallage Shobu.

Of the 148 leases to be re-contracted, 38 are in the final stages of negotiations with a potential 37-38% uplift over preceeding levels. This should provide the trust with strong organic growth.

Buy, S$1.02 TP.

DBS Vickers, 17 Feb 2014.

Casey said...

Hi AK,

I only invested a very small position in CRT as I don't find myself fully understood their financial report. Their DPU seems too good to be true, and I am worry on its sustainability. Hope that you can enlighten me:
In the latest financial report, their EPS was stated as 5.51, DPU is 5.24. But almost half of the EPS was derived from non-cash property value gain. It seems that they are distributing part of the fair value gain... It s cash flow statement also reflected this. As there is a big gap between EPS with the fair value gain and EPS without the fair value gain, I suspect if the DPU is sustainable. Surely, with the financing activity done so far, I don't see the drop of DPU in coming half-yearly distribution if the management wanted to distribute its cash from financing activity this way. But again, it is like 雾里看花。so far, I still find Saizen by far more attractive than CRT.

Did I miss out something or did I misunderstand the report?


AK71 said...

Hi Casey,

I would say that your understanding is correct if you were looking at a company but Croesus Retail Trust is operating like a REIT. So, if we put on our REIT glasses, it would make sense.

Basically, the Trust distributes income to unitholders. It does not distribute its earnings. This is what all REITs do and since CRT is operating like a REIT in spite of being a business trust, it is what it is doing too.

It is always prudent to question the sustainability of distributions. Sustainability will depend on whether rental income will be able to keep up with any increase in interest rates (cost of debt).

The worst case scenario is one in which rental income sees a decline while cost of debt goes up. What do you think is the probability of this happening in Japan now? :)

AK71 said...

Hi Capricon,

I remember that Saizen REIT had their AGM at Hotel Inter-Continental once. I attended the AGM that year. ;p

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