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.

Disclaimer

These commentaries are intended for general circulation. It does not have regard to the specific investment objectives, financial situation and particular needs of any person who may receive this document. Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of any person acting based on this information. Opinions expressed in these commentaries are subject to change without notice. Investments are subject to investment risks including the possible loss of the principal amount invested. The value of the units and the income from them may fall as well as rise. Past performance figures as well as any projection or forecast used in these commentaries are not necessarily indicative of future or likely performance. Phillip Securities Pte Ltd (PSPL), its directors, connected persons or employees may from time to time have an interest in the financial instruments mentioned in these commentaries. Investors may wish to seek advice from a financial adviser before investing. In the event that investors choose not to seek advice from a financial adviser, they should consider whether the investment is suitable for them.

The information contained in these commentaries has been obtained from public sources which PSPL has no reason to believe are unreliable and any analysis, forecasts, projections, expectations and opinions (collectively the “Research”) contained in these commentaries are based on such information and are expressions of belief only. PSPL has not verified this information and no representation or warranty, express or implied, is made that such information or Research is accurate, complete or verified or should be relied upon as such. Any such information or Research contained in these commentaries are subject to change, and PSPL shall not have any responsibility to maintain the information or Research made available or to supply any corrections, updates or releases in connection therewith. In no event will PSPL be liable for any special, indirect, incidental or consequential damages which may be incurred from the use of the information or Research made available, even if it has been advised of the possibility of such damages. The companies and their employees mentioned in these commentaries cannot be held liable for any errors, inaccuracies and/or omissions howsoever caused. Any opinion or advice herein is made on a general basis and is subject to change without notice. The information provided in these commentaries may contain optimistic statements regarding future events or future financial performance of countries, markets or companies. You must make your own financial assessment of the relevance, accuracy and adequacy of the information provided in these commentaries.

Views and any strategies described in these commentaries may not be suitable for all investors. Opinions expressed herein may differ from the opinions expressed by other units of PSPL or its connected persons and associates. Any reference to or discussion of investment products or commodities in these commentaries is purely for illustrative purposes only and must not be construed as a recommendation, an offer or solicitation for the subscription, purchase or sale of the investment products or commodities mentioned.

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.

No Related Market Journal.