CRT – OSK DMG

Expanding Its Presence In Japan

Croesus proposes to acquire One’s Mall in Chiba, Japan for SGD132.5m with a NLA area of around 52,000 sqm and a 99.4% occupancy rate. It will fund this acquisition partly via the issuance of 78.9m new private placement shares at SGD0.89-SGD0.92 a share, raising around SGD71m and the rest by local and Japanese debt. With this, gearing drops to 50% from 52% while DPU rises marginally to SGD0.09 from SGD0.0898. Maintain BUY with SGD1.15 TP.

• Private placement at SGD0.89-0.92/share. Croesus Retail Trust (Croesus) will partially fund this acquisition via a private placement of around 78.9m new shares at SGD0.89-0.92 per share, which will raise between SGD70.2m and SGD72.6m. It represents a 2.7%-5.9% discount to the adjusted volume weighted average price (VWAP) of SGD0.945 per share on 1 Sept (after deducting SGD5.4 cents from 2H14 declared dividend and advanced distribution). In addition, about SGD74.1m will be raised from new Japanese local debt (interest rate of 1.3% per annum) and the remaining SGD6m will be tapped from the existing local medium term note (MTN) programme (interest rate of 3.8% per annum).
  
• Large-scale retail shopping complex. One’s Mall is a freehold, largescale retail shopping complex with 52 tenants across a NLA of more than 52,000 sqm and a weighted average lease expiry (WALE) of 5.8 years. Opened in 2000, it is one of the largest retail facilities in Chiba Prefecture with a 99.4% occupancy rate. The property is situated in Inage Ward, one of the six wards in Chiba City, located within a suburban residential area with high population density. With 1,534 car park lots and a frontage along the National Road Route 16, a major arterial road, it provides visibility and easy accessibility to customers with cars.
  
• Maintain BUY with a SGD1.15 TP. We believe that this proposed acquisition is positive and in line with management’s strategy for Croesus, as it is marginally yield accretive (+0.002%), despite the fact that new shares are being placed out. Gearing drops to 50% from 52%, giving it more debt headroom for potential acquisitions down the road. Lastly, it allows the company to further expand its asset base and ride on any potential tightening of capitalisation rates. Maintain BUY with a SGD1.15 TP.