CRT – DBSV

Executing its growth strategy

• Acquires One’s Mall in Greater Tokyo for JPY11bn, a 5% discount to the independent market valuation
  
• Acquisition partially funded by recent S$72.2m share placement
  
• Maintain BUY, TP of S$1.10
  

Further expansion into Greater Tokyo. CRT announced the acquisition of One’s Mall for JPY11bn (S$132.5m) which represents (1) a 5.2% discount to the JPY11.6bn (S$139.8m) independent valuation, and (2) an initial NPI yield of 5.8%. One’s Mall is a freehold, large-scale retail complex (NLA of 52,844 sqm) located in Inage Ward within Chiba City, which is 40km southeast of Tokyo. As of end- Jun14, occupancy and WALE stood at 99.4% and 5.8 years respectively. The mall is located next to a major arterial road and is in an area served by three major train lines. It also provides exposure to a trade area which has a higher population/household growth and larger proportion of high income households than the national and prefecture average. The mall’s key tenants include Daiei, Central Sports, Toys ‘R’ Us, Nitori and Sports DEPO.

0.1%/0.8% uplifts to FY15/16F DPU. The acquisition of One’s Mall will be funded via (1) recently completed S$72.2m share placement – 78.9m shares at an issue price of S$0.915 per share, (2) new Japanese local bank debt of JPY6,150m (includes JPY650m payment of consumption tax which will be repaid within 12 months from completion of the acquisition) at an interest rate of 1.29%, and (3) JPY500m from the S$100m worth of bonds issued in Jan14. Post-acquisition, total NLA will increase 27% to 251,013 sqm with exposure to the top ten tenants dropping from 71% of NLA to 69%. WALE will also decline to 9.1 years from 10 years. In addition, we estimate 0.1%/0.8% uplifts to FY15/16F DPU with gearing increasing marginally to 52% (51.2% including JPY650m consumption tax) from 51.7% at end-FY14.

Maintain BUY. We continue to like CRT for its exposure to the Japanese retail market and the prospects of further cap rate compression. Maintain BUY with TP of S$1.10.