CRCT – DBSV

Performance dragged by strong S$

• Improved operating performance and cost management dragged by strong S$

• Asset enhancement works successfully rolled out

• Maintain Hold with TP $1.28

Commendable quarter. CRCT reported a 4.7% yoy (+2.5% qoq) growth in topline to S$30.9m. Operating performance improved but hit by stronger S$ vs RMB. NPI rose 7.1% yoy and 8.8% qoq sequentially to $20.7m on improved cost management. In RMB terms, revenue grew by 11.1% yoy to RMB159m thanks to higher portfolio occupancy of 98.4% and an average 8% higher rental renewals on the back of +33.7% yoy greater tenant sales and 18.4% yoy increase in shoppers’ traffic. Distributable income grew a modest 1.0% yoy to S$13.5m due to under-provision of tax in prior years, translating to DPU of 2.15 Scts.

AEI works bearing fruit. AEI works undertaken in the past year has begun to bear fruits and the remaining 440 leases expiring this year should do well with the management’s proactive leasing strategies. Reconfiguration of shops at Xinwu and conversion of Saihan into a multi-tenanted mall raised renewal rents by 21% and 29% respectively. Occupancy at Qibao Mall improved to 92.1% post tenancy repositioning, including bringing in arcade operator Tom’s World ad children fashion retailer BaoDaXiang, led to a 47% jump in NPI. Meanwhile increased shopper footfalls in Xizhimen and Wangjing malls boosted revenue from tenant sales. Continued AEI and adoption of proactive leasing strategy would deliver future growths. With current gearing of 32.6%, CRCT will explore further acquisitions. Debts profile remains healthy with only $77m of debts due this year, of which $24.8m are onshore loans. Average cost of funds should remain fairly low compared to the present 2.8%.

Maintain Hold. As a pure China retail landlord, CRCT should benefit from the strong retail sales in China as domestic and international retailers expand their presence. Maintain Hold with TP of $1.28. CRCT currently offers FY11 and FY12 DPU yield of 6.6-6.7%.