by millionairemind » Fri Oct 31, 2008 3:59 pm
CapitaRetail China Trust
Oct 30 close: S$0.545
DBS Vickers Securities, Oct 30
SLEEPING dragon: CapitaRetail China Trust's (CRCT) Q3 2008 numbers were in line with expectations.
Gross revenues and net property income grew by 49 per cent and 54 per cent year-on-year (y-o-y) to S$28.3 million and $18.1 million respectively. Growth was mainly from: 1) contribution from Xizhimen, and 2) improved occupancies at their various malls. Distribution income was 10.5 per cent higher y-o-y at S$12 million, translating into a DPU of 2.01 cents.
In Q3 2008, CRCT held back 3 per cent of net profit for working capital purposes, but it is committed to distribute 100 per cent of its income in FY2008.
Rental growth and occupancies are expected to soften on the back of a slowing domestic engine and influx of retail space. In the near term, CRCT is likely to focus its efforts on improving tenant mix in its various malls to optimise yields, retain quality tenants and improve shopper traffic.
Acquisition-funded purchases after the completion of Xizhimen Phase 2 should slow down till equity markets are more conducive for fund-raising.
In terms of enhancement activities, Saihan Mall, which has undergone extensive asset enhancement initiative activities since Q3 2007, is 84 per cent completed and is on track for completion by the end of the year.
While valuations remain attractive at 0.5 times P/B with a FY2008-FY2010 DPU yield ranging from 14 to 16 per cent, catalyst for the stock in the near term appears lacking on the back of limited growth opportunities.
Maintain 'hold', with a target price of S$0.62 based on 20 per cent discount to our RNAV of S$0.77.
HOLD
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch
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