Stock Market Today: Croesus Retail Trust's 2Q DPU rises 5.2% to 1.81 cents

Croesus Retail Trust (CRT) has announced a distribution per unit (DPU) of 1.81 cents for 2Q17 ended Dec 31. This represents a 5.2% increase from the restated DPU of 1.72 cents in 2Q16 to reflect the change in the number of issued shares due to the rights issue last Nov, and the preferential offering in Aug.

Gross revenue for the quarter stood at JPY 3,181 million ($39.8 million), which was 30.7% higher than the JPY2,434 million recorded in 2Q16, due mainly to a larger portfolio of income-producing properties, following the trust's acquisitions of Torius, Fuji Grand Natalie, Mallage Saga and Feeeal Asahikawa.

While higher variable rent which arose from stronger tenant sales at Mallage Shobu, a one-off compensation from an early lease termination also boded positively for CRT's gross revenue. Net property income (NPI) grew y-o-y by 23.2% in 2Q17 to JPY 1,685 million from JPY 1,368 million a year ago, on the back of contributions from recent acquisitions and outperformance from Mallage Shobu.

For the same factors which contributed to the increase in NPI, as well as due to cost savings amounting to JPY 88 million in the quarter following the successful internalisation of CRT's trustee-manager, income available for distribution grew 21.4% to JPY 1,181 million for 2Q17.

For 1H17, CRT posted DPU of 3.60 cents, 7.5% higher than a restated 1H16 DPU of 3.35 cents. CRT has committed to distribute 100% of its distributable income till June 30 and at least 90% of its distributable income thereafter. It will make distributions to unitholders on a semi-annual basis with the amounts calculated as at June 30 and Dec 31 each year for the six-month period ending on each of the said dates.

To mitigate against foreign exchange fluctuations, CRT has hedged close to 100% of its expected distributable income up to Dec 2018. Our financial performance for the first half is a good reflection of CRT's ongoing efforts in areas such as enhancement initiatives and tenant renewal exercises. We are also glad that cost savings from our internalisation of the trustee-manager are being realised, enhancing distributions to unitholders," comments Jim Chang, CEO of Croesus Retail Asset Management.

In the coming quarters, we remain committed towards growing CRT's portfolio and distributions steadily and sustainably, and will continue to explore viable organic and inorganic opportunities to enhance CRT's value. Barring any unforeseen circumstances, CRT's manager says the trust's properties are expected to continue generating robust and stable cash flows in the next 12 months. Units of CRT closed 0.6% higher at 87 cents on Monday.

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Stock Market Today:Manulife US REIT declares FY16 DPU of 3.55 US cents, beating forecast by 4.8%

The manager of Manulife US REIT reported a distribution per unit (DPU) of 3.55 US cents (5 cents) for FY16, which exceeded the forecast DPU of 3.39 US cents by 4.8% due to higher property performance and lower borrowing costs and trust expenses.

Based on the REIT's closing price of 86 US cents on Feb 10, the REIT has an annualised yield of 6.7%.The REIT recorded FY16 gross revenue of US$47.5 million, which was 1.5% below forecast due to lower recovery revenues.

Nevertheless, it generated net property income (NPI) of US$30 million, 1% higher than the REIT's initial public offering (IPO) forecast, mainly due to higher rental and other income, and lower property expenses.As such, distributable income for the full year stood at US$22.3 million, beating the REIT's forecast by 4.8% due to higher NPI, together with lower finance and other trust expenses.

For the fourth quarter ended Dec 31, Manulife US REIT recorded distributable income of US$9.7 million, which outperformed the REIT's forecast by 3.6%. A DPU of 1.54 US cents was recorded for the quarter.

In the SGX press release filed before the market opened on Monday, Jill Smith, CEO of the REIT's manager, noted that Manulife US REIT's portfolio valuation grew 7.2% in the reporting year, underpinned by the positive fundamentals of the US real estate market.

Moving forward, the U.S. commercial market is poised to benefit from the growth of the U.S. economy. We are excited by the year ahead and will drive the REIT forward in the best interests of unitholders," says Smith. According to its policy, the REIT will be distributing 100% of its distributable income from its listing date on May 20, 2016, to Dec 31 in the same year.

The manger will pay its first distribution on March 30.Units of Manulife US REIT closed flat at 86 US cents on Friday.

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Stock Market Today:Neo Group's profitability ahead hinges on food catering segment

RHB has downgraded its call on Neo Group from buy to neutral, lowering its target price on the stock to 61 cents from 80 cents previously on a weaker outlook for Singapore's food catering industry.

Neo Group, whose business is mainly in food catering, yesterday reported a 3Q17 earnings fall from $4.8 million in 3Q16 to just $0.1 million in the absence of a one-time gain.

In a report on Friday, RHB analyst Juliana Cai says she suspects the group's market share had declined during the quarter, based on the 6.5% fall in revenue reported in its latest set of results despite a y-o-y rebound in food catering sales in Oct and Nov 2016 of 5.8% and 7.4% respectively.

We note that topline for [the food catering segment] fell 3.6% for 9MFY17 (Mar) on the absence of SG50 celebrations. Going into 2017, we think the slowdown in Singapore's economy would result in further tightening of recreational budgets for both corporate and private social events," says the analyst.

Although Neo Group's food manufacturing arm has shown improvement by turning operationally profitable for the quarter thanks to the revival of the group's DoDo brand of fishballs, she believes some of the cost savings will be delayed in this segment as the transfer of operations to the group's new premise at 22 Senoko Way is expected to take place over the course of 2017.

As such, the research house as cut its FY17F-19F earnings estimates for the group by about 45% per annum, especially since it now expects muted growth and weaker margins in the food catering business.

We expect the growth of its other segments - with lower margins - to also pull down the group's overall profitability, Cai adds. As at 10.12am, shares of Neo Group are trading flat at 57.5 cents.

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Stock Market Today:F&N raised its stake in Vinamilk, what does that mean for investors?

Fraser & Neave announced on Wednesday that it had increased its stake in Vinamilk from 5.4% to 17.5% to date and added that it would continue to acquire more shares when the opportunity arises.

DBS Group Research estimates that the investment was at least $705 million and that its expected F&N to look for inorganic growth opportunities. So what does this mean for F&N investors?

DBS' analyst Andy Sim expects F&N to receive a higher dividend income from its increased stake in Vinamilk and has raised F&N's earnings forecast by 11% to $103 million for FY17, and by 10% to $106 million for FY18.

We believe [F&N] would continue to be on the prowl for acquisitions to add on to its current geographical and product or brand repertoire, says Sim in a note on Thursday. "While its available cash has been largely depleted by its investment in Vinamilk, we believe it will leverage on its balance sheet for debt, and possibly equity fund raising."

Meanwhile, the group's results for 1QFY17 were within expectation, with earnings falling 12% on higher raw material prices, the weaker ringgit and higher marketing and promotional expenses. Revenue remained stable, aided by the new contribution from its Warburg Vending acquisition, new products, a growing distribution in Myanmar, and the earlier Lunar New Year in 2017.

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