Saturday, May 04, 2013

Croesus Retail Trust

Short Summary:
Croesus Retail Trust initial portfolio consists of 4 Japan suburban malls operating at 100% occupancy. Most of the malls tenants are under long lease master tenant, with the weighted average lease expiry lease at 11.3 years. This will be the first Japan retail trust to list on SGX, giving investor exposure to Japan retail market.

Forecast Dividend:
2014: 8.0%
2015: 8.1%
*Based on issue price of $0.930 and Forex exchange rate of 79.15 yen to 1 SGD in 2014 and 78.78 yen to 1 SGD in 2015

Dividend Policy:
To distribute 100% of its distributable income for 2014 to 2015. Thereafter, the trust will distribute 90% of its distributable income.
Future potential acquisition assets
Shenyang Retail Project (Phase 1) - Shenhe Shenyang, Liaoning
Maluzhen Retail Project - Jiading, Shanghai
Mallage Saga - Saga
Luz Omori - Tokyo
Forecast Kyoto Kawaramachi - Kyoto
NIS Wave I - Tokyo
Overall Summary:
-Stable assets and dividend due to long lease tenants
-Mall at 100% occupancy
-Attractive yield
-yield calculation based on current weak yen, potential increase in yield (and stock price) when yen strengthen
-Good prospect given recent Japan government monetary stimulus to increase domestic consumption
-Further weakening of yen, causing yield to decrease (In my opinion, this is unlikely unless the Japan government want to face the wrath of G20 for currency war)
-Strengthening of SGD
-High gearing, hence future acquisition (if any) will likely to be issuance of new units, causing yield dilution.
-High Gearing at 47%, can increase up to 60%

In my opinion, Yen is currently trading at all time low and there isn't further room for Yen to weaken (unless the Japan government wants to face the wrath of G20 for currency war). The retail trust provides attractive dividend at 8%, which easily trumps any of the current listed Singapore mall trust (Usually trading at 5%-6% yield range). The retail trust is stable, with most of its tenants under long lease. The prospect of earning from increase yield, which will likely result in increasing stock price when Yen strengthens easily beats all weakness. From the 10 years graph, Yen should be comfortable in the range of 65 Yen to 1 SGD, which gives it a potential to strengthen by another 18% from current rate. In times of crisis, Yen will also likely to strengthen as investors view it as a safe haven (See 2009 time frame)

Some useful information:

[3 May 2013], [9.00 a.m.] : Opening date and time for the Public Offer.
[8 May 2013], [12.00 noon] : Closing date and time for the Public Offer.
[9 May 2013] : Balloting of applications under the Public Offer, if necessary.
[10 May 2013]: [2.00 p.m.] Start of trading

Rating for investment: 9/10

Disclaimer: You may use the above information as a guide, but please invest based on your own judgment.

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