CapitaLand Retail China Trust

CapitaLand Retail China Trust | Buy

March 28 close: $1.55

Fair value: $1.66

Broker: OCBC Investment Research, March 28

Going forward, we expect retail sales growth in China to remain healthy for both online and offline stores. With Sasseur Reit units starting trading on Wednesday, we believe that both Reits may be closely compared as they both fall within the "Chinese retail" space. Nonetheless, it is important to draw some distinctions as the rental structure is quite different.

Ignoring Sasseur Reit's two years of guaranteed total rent, we believe CapitaLand Retail China Trust's structure enjoys greater stability though less upside participation. Its rental income is directly determined by the underlying leases within its portfolio, of which we believe a much smaller proportion is determined by turnover sales.

We have kept our forecasts for CapitaLand Retail China Trust largely intact and our fair value remains at $1.66.

We upgrade from "hold" to "buy".

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