New SGD Issue Review : 3Y Croesus Reit Trust

Issuer              Croesus Retail Asset Management Pte. Ltd. ( in its capacity as trustee-manager of Croesus Retail Trust)
Status:             Senior, unsecured
Rating:             Unrated
Format:            Reg S, S274 & 275 of Singapore SFA
Tenor:               3 Years @ 4.75% area
Issue Size:       TBD
Coupon:           TBD
Payment:          Semi-annual, actual/365 (fixed)
Issue Date:       [ ] January 2014
Maturity Date:   [ ] January 2017
Details:             SGD250K/EMTN Programme/English Law/CDP/SGX-ST
Joint Lead Managers & Bookrunners
Timing:             This week’s business, as early as today

If we must know, Croesus was the last king of Lydia before his kingdom fell to the Persians but he was also a rich man.

Croesus is a business trust which comprises of an entirely Japanese mall portfolio, was quite timely launched just less than a month after things started to sour, on the 10th of May 2013. After its initial 2 days of trading, its price (current $0.88 vs IPO price $0.93, high $1.18) has not looked back up for its market cap of SGD 376 million. Gross dividend yield is indicating 7.41% after announcing a 3.26 ct dividend in November.

The stock is rated a Buy as of Nov 13 by Vickers.

Their pipeline of assets are all in China.

In less than a year and they are raising money via the bond market to facilitate expansion… in China.

I am not a fan of retail spaces and this technophobe here has just received 3 items bought on line since overcoming my fear of internet purchasing. My new Nike sneakers, my new air dehumidifier and today… my new iRobot ! Still awaiting the vitamins and some books.

As such, I do not have a strong view on this name. It’s only comparables would be Fortune Reit which has a portfolio of retail malls and properties in HK,  Lippo Malls Indonesia Retail, Ascendas Hospitality Trust with Australian assets, Religare Health Trust based in India and Mapletree Greater China Commercial Trust.

The risk would be for Croesus shareholders, if you ask me. The falling JPY affects earnings which are supposedly 80% hedged but volatility can be unfriendly. And they are obviously eager for more acquisitions going ahead to build up their portfolio which means more money required.

At 4.75% ?

Given that LMRT 3Y went at 4.25% last Sep and 4Y at 4.48% in Nov, Croesus paying 4.75% is a fair deal as LMRT is a proper REIT and regulated as such. Croesus is also much smaller and a new player in the market. This issue should see decent pockets of private banking demand. Books are over 100 million as we speak.

Verdict : No firm conviction.