Comparison of Retail REITs and Croesus Retail Trust Q3 2017 Earnings May 15, 2017

Croesus Retail Q3 2017 Earnings Update

For this week, I will be posting an earnings update on Croesus Retail Trust (CRT), which announced their third quarter earnings.

CRT is the first Asia Pacific retail business trust listed on SGX with an initial focus in Japan. Currently their portfolio of core assets are derived there but with a long term focus on pursuing development or acquisition opportunities in the Asia Pacific region. The latest developments on their earnings are:

  • 3Q YTD Gross Revenue increased 35% from 6,906mil to 9,326mil (JPY)
  • 3Q YTD Net Property Income increased 22% from 4,009mil to 4,892mil (JPY)
  • 3Q YTD DPU grew 9.9% from 5.14 cents to 5.65 cents (SGD)
  • Occupancy stands 97.7%
  • Weighted Average Lease Expiry of 6.5 years
  • Cost of Debt reduced from 1.90% to 1.68%

Following an announcement on 26 April 2017 on a potential acquisition of issued units in CRT, its share price has traded upwards from $0.94 to a high of $1.02. While discussions are still preliminary, I would encourage investors not to speculate but stick to the fundamentals.

In my personal opinion, CRT has been strong on 3 fronts:
1) Ability to drive acquisition and maintaining a high occupancy rate for their portfolio.
2) Consistently grow their distribution per unit.
3) Sound hedging strategy to eliminate uncertainty on their currency.

Comparison of Retail REITs

When you step foot into a shopping mall, have your ever wonder whether it is owned by a listed trust? Junction 8, Ngee Ann City and Causeway Point are examples of properties owned by REITs that are traded on the Singapore Stock Exchange. Below is a comparison table of the fundamentals of some of the retail REITs. For fundamental analysis on REITs, you can refer to the recent article “5 Things to look out for when investing in REITs”.

Croesus Retail Trust Lippo Mall Indonesia Retail Trust CapitaLand Mall Trust Fraser CentrePoint Trust Starhill Global REIT
Geographical Exposure Japan Indonesia Singapore Singapore Singapore, Australia, Malaysia, China, Japan
Occupancy Rate* 97.7% 93.8% 97.7% 87.2% 95.1%
Weighted Average Lease Expiry (WALE) NLA* 6.5 Years 4.35 Years 2.1 Years by Gross Rental 1.70 Years 6.7 Years
Gearing Ratio* 46.1% 32.2% 35.3% 29.4% 35.3%
Interest Coverage Ratio* 4.8(x) 3.7(x) 5.0(x) 7.56(x) 4.20(x)
Price-to-Book Value** 1.003 1.08 1.034 1.052 0.81
NAV* JPY 76.43 SGD $0.37 SGD $1.89 SGD $1.93 SGD $0.92
Closing(12/5/2017) $0.97 $0.415 $1.95 $2.030 $0.75
Dividend Yield** 6.79% 8.22% 5.71% 5.81% 6.71%

* Information extracted from company’s latest interim report published.
** Information extracted from SGX stock facts based on 12 May 2017 closing

While online shopping and e-commerce companies (e.g. Taobao, Qoo10) are posing a direct threat to the brick and mortar stores, shoppers are still turning to stores for products such as groceries, daily necessities or even watches and jewellery. Investors looking for more resilient portfolio can consider those malls with sub-urban presence as their target audience are more centered towards the domestic/local crowd and tend to be less affected by external influences.

Passive investors looking to accumulate REITs over time can consider adopting the dollar-cost-averaging method. With a disciplined approach, one may be able to build up a portfolio at a lower averaged cost.

If you wish to know more information about Share Builders Plan or any other stocks, you can speak to your designated Trading Representatives or a Dealer at a Phillip Investor Centre near you.


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About the author

Mr Michael Tay
Equity Dealer

Mr. Michael Tay currently provides dealing services to over 17,000 trading accounts and is part of the POEMS Dealing, the core in-house dealing department of Phillip Securities Pte Ltd.

Michael is a strong believer of value investing, focusing on companies with strong fundamentals and good dividend policy. Apart from his dealing role, he often provides training seminars on Fundamental Analysis topics to further enrich his clients’ financial knowledge.

Michael holds a Bachelor Degree of Finance from the SIM University (UniSIM) and was awarded the CFA Singapore Silver Award in 2012.

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