Croesus Retail Trust ("CRT") Preview

This is a funny name which i don't really know how to pronounce it. Should be read with a "silent e"?

Anyway, i am looking at this now because i have to indicate whether i am interested in it but i am not going to do a detailed analysis until it is launched. 

CRT is the first Asia-Pacific retail trust that has its "initial portfolio" located in Japan and it is the second attempt in which it is trying to list on the SGX. Saizen is the other REIT that came to my mind, but it is focused on the residential segment. My IPO write up in 2007 was here and i must say, the write up last time is so....yucky. hahaha Saizen has since went through a lot of issues (based on my rough recollection) with difficulties in renting out its apartments in 2009. The current yield on Saizen REIT is around 6.6%.

I am not sure whether the initial portfolio are good quality properties, as such, i will appraise this purely from a yield perspective assuming it can continue to rent out 100% of its units and rental remained the same. In addition, CRT has the right of first refusal on 2 retail projects in China and some properties in Japan which they will only acquire if it is accretive. The tentative launch date for the public offer is next week. 

In addition, the assets will be injected at a "discount" to its valuation price (around $15.8m at current rate of $12.5/1000 Yen. 

According to the draft prospectus, the forecast yield is around 8%. CRT has used an exchange rate of around $1.263/Yen. This is a tad higher than the current rate of $1.25. However, having said that, this is the best time to visit Japan, ever. The yen is at a historical low and i have been stocking up on Yen recently. I have visited Japan at least once every year since 2007...and from my memories, the current rate is one of the best rate ever. :oP

Above is the 10 year chart on SGD/Yen. You see the Sgd/Yen rate and you know that now is the best time to buy Yen (in case you play forex). hahaha. I believe the yen will revert to its mean so over the longer period. Assuming a more "normal" forex rate of $0.0145, the implied yield is actually higher if the future distributions are converted at a better rate.The yield will improve to 9.18% if i use an average rate of $0.0.145 but of course, this will be the "upside" scenario. In addition, when crisis comes, the Yen will appreciate as it is perceived to be a safe haven currency.

I like the retail space as well so i have no issues with this "segment" vis-a-vis Saizen. In recent months, Abenomics is working its magic to lure investors back to Japan. Another article for your bedtime reading on Abenomics is from our Today's papers.

Conclusion: It is a Hoot for me based on my preliminary review.... ^_^

Happy IPOing.