Croesus Retail Trust targets 20-30% DPU hike

It will engage cost saving and asset enhancement initiatives.

Croesus Retail Trust (CRT) is shifting focus to cost savings and asset enhancement initiatives (AEIs) to enhance DPU growth, said RHB.

According to the research house, since listing, CRT has focused on increasing its portfolio which had been successful. Going forward, it believes that the company would likely shift its focus to cost savings initiatives such as lowering cost of debt by refinancing and from internalisation of its asset manager.

In addition, CRT it said, would also focus on AEIs to improve rental income from its retail malls.

"As a result, we expect a low probability of equity placement exercises in the next two years," it said.

Management expects DPU to increase between 20-30% in the next few years from successful implementation of these initiatives, which would be more DPU accretive than an acquisition.

RHB notes that these initiatives should also provide more stability to its share price and lower the probability of equity placements going forward.

In terms of macroeconomic outlook, RHB said that Japan’s negative interest rate environment would likely lower CRT’s average cost of debt and generate substantial cost savings for the company when it refinances its debt.

Furthermore, CRT has an average forex hedging rate of SGD/JPY 83.57 for FY17F and SGD/JPY 76.39 for FY18F, representing a 10% DPU increase just from forex hedges alone, it added.