CRCT – DBS

Steady retail revenues

At a Glance

• 4Q09 DPU of 2.04 Scts in line
• Balance sheet metrics stable, gearing at 33.6%
• c26% of its FY09 revenue base up for renewal in FY10
• Maintain HOLD, TP adjusted to S$1.22.

Comment on Results

4Q DPU of 2.04 Scts in line. CRCT 4Q09 results were in line with our expectations. Gross revenues and net property income were 5.3% and 0.8% lower yoy at S$29.6m and S$20.3m respectively. The weaker performance was mainly due to weaker RMB and S$, tenant remixing activities at Wangjing mall coupled with lower performance from Saihan Mall as its AEI activities are still underway. Income available for distribution grew a marginal 1.3% to S$12.9m.

Book NAV of S$1.04. The trust also revalued up its book value by 1.2%, gearing levels remained the same at 33.6%, interest cover is high at 8.0x.

Performance should remain stable in 2010. While occupancy levels remained relatively stable at 95%, rental reversions at Wangjing (-4.9%) and Xizhimen (-3.3%) continued to be negative in 4Q09 due to tenant remixing but declines narrowed when compared to a year ago. Performance was somewhat offset by stronger performance at Xinwu Mall (+61.9%). Looking ahead, CRCT will be (i) renewing 23.5% of its space in FY10F; of which the majority will be from Xizhimen, Saihan and Wangjing malls.

Recommendation

Maintain HOLD, TP S1.22 based on DCF. While we like CRCT for exposure into China’s consumption and urbanization story in the longer term, we see limited upside to our target price at current levels. Our TP is adjusted upwards as we roll forward our numbers.