Will the rough retail landscape push investors away from Croesus Retail Trust?

Japan’s adoption of negative interest rates is key.

Investors jittery over the uncertain retail landscape can look to Croesus Retail Trust (CRT), as analysts peg it as a safe haven as it provides clear earnings visibility and stability.

According to a report by RHB, CRT is likely to refinance its maturing debt at lower interest costs given that Japan is adopting negative interest rates. Additionally, debt financing for future acquisitions would be at lower costs. Tack this alongside an almost 100% occupancy rates, long weighted average lease expiry, and fully hedged DPU until June in FY17 set to limit risks and interest costs for two years, and CRT is a high-yielding defensive pick.

Moreover, CRT’s malls are outperforming despite the current climate. Even as retail sales figures in Japan sink, CRT’s portfolio of defensive suburban retail malls has mostly stayed resilient, with raised net property income from most of its malls. For instance, both footfall and sales across Mallage Shobu have inched up 4.4% and 6.3% YoY in the first half of FY16.

Furthermore, CRT is likely to expand its portfolio by nabbing similar-style malls in Japan, especially now that it can benefit from Japan’s interest rates. CRT management also emphasised that any prospective acquisition will be earnings-accretive.

RHB further notes that asset enhancement initiatives (AEIs) for Torius are still in the planning stage, and that no major AEI plans are likely in the near term. However, CRT underscored that it is eager to undergo AEI for Torius to fully realised its potential of achieving increased rentals in comparison to its peers in the surrounding area.