Analysts are positive on CapitaLand Retail China Trust’s (CRCT) proposed $1 billion acquisition of five business parks and the remainder 49% stake in Rock Square mall.
This comes after CRCT recently expanded its mandate to cover multi-assets used primarily for retail, office and industrial use.
The proposed acquisition will be financed through a mix of debt, equity, perpetual securities and internal cash resources.
OCBC Investment Research says the proposed acquisition is expected to be distribution per unit (DPU) accretive with pro-forma FY19/1HFY20 DPU increasing 2.8% and 5.1%, respectively.
“The proposed acquisition will pave the way to enhance CRCT’s long-term resilience and diversification,” OCBC analyst Chu Peng writes in a note dated Nov 9.
UBS Securities says the net property income yield and DPU accretion was a positive surprise.
The brokerage reckons that a $300m potential equity raising is “digestible”, while the use of perpetual securities would keep gearing in check.
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“Execution is crucial to improve investor confidence and funding cost,” UBS analysts Kok Wai Fai and Michael Lim write in a Nov 6 report.
Meanwhile, DBS Group Research says CRCT could potentially grow its portfolio by more than tenfold.
“With an expanded investable universe which will include business parks, commercial, data centres and logistics, we believe that acquisitions in these asset classes will bring stability and future-proof its earnings profile against future pandemics,” DBS analysts Geraldine Wong and Derek Tan write in a note dated Nov 6.
OCBC, UBS and DBS have maintained their “buy” rating for CRCT with an unchanged fair value of $1.35 and target price of $1.35 and $1.55, respectively.
As at 1.55 pm, CRCT was up 2 cents or 1.6% at $1.28 with 9.2 million units changed hands.