CRT – OSK DMG

High-Yield Proxy To Japan's Retail Scene

With Japan being the 3rd biggest retail market in the world with 127m consumers contributing an average of USD54k per household, Croesus Retail Trust, with a 8% dividend yield and close to 100% occupancy rate, is the first Asia-Pacific retail business trust and only proxy in SGX into the Japanese retail scene with 6 Japanese retail mall assets. Initiate coverage with a BUY and a DDM-backed TP of SGD1.15, with a 7.9% cost of equity (COE) and a distribution yield of >7%.

• Proxy to Japanese retail mall scene. With Abenomics monetary policies in place to create inflation and boost the Japanese economy, Croesus Retail Trust is poised to be one of the key beneficiaries as traffic flow at its malls has been increasing while capitalisation rates for its existing malls and other malls in Japan have been decreasing. It is the only business trust in the SGX that provides a proxy for investors who are interested to enter the Japanese retail mall scene.
• Long WALE of 10.2 years and highly resilient. Its portfolio has a weighted average lease expiry (WALE) (by NLA) of 10.2 years, which ensures long-term stability. Moreover, all its six retail malls are conveniently accessible via major highways, rail stations, and arterial roads or in suburban regions with high population density. This helps its malls to attract steady traffic flow and maintain demand for its properties, which reached approximately 100% occupancy as at 31 March 2014.
• Superior dividend yield of >8% far surpasses its peers'. Compared to its peers, particularly Japanese REITs in Japan, Croesus Retail Trust offers a far superior dividend yield of >8% at the current share price vs 3- 5% for the majority of its Japanese peers.
• Initiate coverage with a DDM-backed TP of SGD1.15, 7.9% COE. Our SGD1.15 TP represents a 20% potential upside from the current price of SGD0.96. At our TP, its distribution yield should stay at an attractive 7%. We like Croesus Retail Trust for its: i) stability, ii) attractive dividend yield, iii) transparent structure, iv) experienced management team, and v) potential positive rental revisions from the Mallage Shobu mall and asset revaluations. Initiate coverage with a dividend discount model (DDM)-backed TP of SGD1.15, with a 7.9% COE.