Friday, August 29, 2014

Croesus Retail Trust - More than 10% dividend yield!

Croesus Retail trust year to date distribution per unit (DPU) is 8.98c. This exceeds forecast by 6.3%. That is $89.80 per 1000 shares that we invested. For the price that i bought, the dividend yield which i got was 10.26% year to date. 10% dividend yield do exist. However, the dividend i got was from the period 10 May 2013 to 30 June 2013 which is more than a year. Q4 FY2014 DPU is 2c. Annualising a quarterly DPU of 2c gives us 8c which represents a yield of 9.14% at the price i bought. Still not too bad. Share price of CRT has also appreciated by 12.5c since I blog about it in November 2013. This is an increase of 14.28%.

All about Croesus Retail Trust

CRT owns shopping malls in Japan. From the initial 4 properties in Japan, they have acquired 2 more properties right in the capital city, Tokyo. This sums up their total number of properties to 6. CRT's debt or gearing ratio is quite high at 51.7%. 20% of its debt is maturing in FY 2017, 60% in FY 2018 and the remaining 20% in FY 2019. The high gearing ratio may be a concern for some.

Two of the properties in Tokyo:

Luz Omori in Ota Ward, Tokyo. located at the intersection of a traditional shopping street and a retail street with strong shopper traffic that leads directly to the JR Omori Station.

Nis Wave I in Tachikawa City, Tokyo. Connected to the JR Tachikawa Station

Net asset value has increased slightly to 90c. At the current price of $1, this represents a premium to fair value. At current price of $1, if we annualised a DPU of 2c to get 8c, it represents a dividend yield of about 8%. This is still quite good. However, we have to ask ourselves whether CRT is still able to give a annual DPU of 8c? Will it be more or lesser in the next FY? With this, we have to bear in mind that CRT's policy is to distribute 100% of its distributable income in FY 2014 and FY 2015 and then at least 90% thereafter. So, there is a possibility that DPU will decrease after FY 2015. For now, we may see the same or more DPU in the next dividend payout assuming rental rates and occupancy rates remain stable.

The future of Croesus Retail Trust

CRT owns only 6 retail properties now. In future, i guess they will continue to expand their portfolio of properties which will hopefully increase DPU for investors. However, with CRT's debt already at quite a high level, they would most likely finance the purchase of further properties by other means. One possible way would be to offer a rights issue to existing shareholders. If that happens, existing shareholders would have the opportunity to accumulate more shares of CRT at an attractive price. Whether the management will do this is anybody's guess now.

Japan's economy is undergoing a recovery. I've blog about the Japan's economy for a number of times before already. The YEN has devalued quite a bit in the past 1-2 years. The devaluation of the YEN is a game changer. Previously, businesses were struggling due to the strong currency. Both exports and tourism suffered due to high costs for foreigners buying Japanese goods. This resulted in a decade of deflationary economy which depress rents and property prices. However, now we see inflation coming back and rental rates will definitely pick up along with a increase property prices.

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Related Posts:
1. Croesus Retail Trust - First Quarter results released and initiated long position
2. The Japan story - Croesus retail trust and Saizen Reit


  1. Any difference in leveraged and non-leveraged yield?

    Why property rental gives an investor higher yield?

    In good times, who care?

    1. Hi Uncle CW,

      As long as there's money, we're happy. Not generating money?, we look for alternatives. Haha