CRCT – DBSV

Portfolio remixing bearing fruit

• Results slightly ahead of expectations

• Delivering on organic and AEI growth

• Maintain Hold, TP $1.28

FY10 DPU of 8.36Scts slightly ahead of consensus. 4Q10 revenue grew 6% q-o-q to S$30.2m while NPI was flat at S$19m, impacted by a strong S$ vs RMB and higher but normalized expense ratio of 37%. Distribution income of S$13m translates to DPU of 2.07Scts, bringing full year DPU to 8.36Scts, ahead of street estimates. The group revalued its portfolio up by 5.8% to book NAV of S$1.17 on better performance and lower property yield of 6.2%.

Portfolio performance boosted by AEI. In RMB terms, revenue grew 4.2% q-o-q to RMB153.5m, lifting full year topline to a record RMB589m, backed by a 25% jump in tenant sales and 15% higher shopper footfalls. Portfolio occupancy increased to 98.1%. The best performing malls were Wangjing and Xinwu, which enjoyed rental reversions of 12% and 11% y-o-y. AEI works including reconfiguring shops at Xinwu helped lift average rents on a RMB/sm basis. In all, the group renewed 451 leases in FY10, with new tenants making up c50% of the remix, including those from F&B and fashion trade sectors. Looking ahead, we expect performance at Saihan and Qibao malls to continue improving following the successful roll out of AEI works. Meanwhile, the recovery in retail rents from better supply/demand dynamics and rising consumption trends should benefit given that 19% of gross income will be renewed in 2011. The group would continue to execute its other growth drivers including potential asset enhancements, particularly at master-leased assets as well as looking for new acquisitions. Its current gearing stands at 31.1%. Debt expiry profile remains healthy with a maturity of 2.2 years with only 16% of total debt to be renewed this year.

Maintain Hold. We project a modest topline growth of 5% in FY11 as the group continues to fine-tune its portfolio tenant mix and occupancy. Maintain Hold with TP adjusted slightly to $1.28 as we fine-tune currency assumptions. CRCT currently offers FY11 and FY12 DPU yield of 6.6-6.7%.