Croesus Retail Trust 1H FY2017 Hong Bao.

This was from a recent conversation:

Reader:
"Croesus Retail Trust reported good results but an investor I know sold all his shares already."

AK;
"We have our reasons for buying or selling. If our facts are right and if our reasoning is sound, we should do OK. We could consider facts and reasons offered by other investors in reviewing our investment thesis but don't be influenced by their buying or selling."

Mallage Shobu, a CRT mall in Saitama.

That Croesus Retail Trust (CRT) has done well is something I should really celebrate twice because it was with the funds that I got from selling my rather big investment in Sabana REIT years ago that I invested in CRT. 

I should celebrate that I was lucky enough to get out of a terribly managed REIT with fairly decent gains and I should celebrate that I was lucky enough to build a good size position in CRT at fairly good prices.

CRT has announced a distribution per unit (DPU) of 3.6c for 1H FY2017. Based on a unit price of 87c, CRT currently offers an annualised distribution yield of 8.28%. 

Gross revenue went up. Net property income (NPI) went up. Distributable income went up. DPU went up. This is what we want to see. All is well.

Now, I want to share a couple of things. If we see distributable income up and DPU is down, how like that? If we see gross revenue down and NPI up, how like that? 

To me, these are a couple of things which might hold me back from making an investment or adding to an investment. I would have to investigate into the reasons and see if something was wrong and if the wrong was enduring.

If you don't understand what I am saying, never mind. I am just talking rubbish, as usual.

Mallage Saga, a CRT mall in Saga.

Anyway, back to CRT. I will make only a few points because the presentation slides are pretty self explanatory:

1. One of the benefits of having an internal manager is cost savings and the savings we saw in 1H FY2017 should be more pronounced in 2H FY2017. This is because the cost savings only started more than halfway into 1Q FY2017. CRT's DPU should have some support from this.

2. I said before that I like AIMS AMP Capital Industrial REIT because they engage in asset enhancement initiatives (AEIs) and redevelopment of existing assets. Doing something with our existing assets to enhance their income generating ability is always preferred and usually less costly compared to simply buying another asset. CRT is pursuing organic growth too. How to say I don't like?

3. The negative interest rates in Japan are not going away anytime soon. This is good news for domestically leveraged entities in Japan like CRT. USA's interest rate hikes will have no direct impact on CRT which is not the case for many S-REITs as Singapore imports her interest rates from the USA.

4. Although CRT's gearing ratio has gone up from 45.3% to 46.1%, the interest cover ratio has also gone up from 3.7x to 4.2x. Higher level of debt is not alarming if debt service ability has strengthened.

I like what I see and I will stay invested.

See press release: HERE.

See presentation slides: HERE.