CRCT FY08 distributable income grew by 43% to S$45.9m (DPU of 7.53 Scts), mainly due to contribution from its acquisition of Xizhimen asset. We view that share price performance could be capped by potential equity raisings, given its current gearing of 33% is near the 35% regulatory gearing cap. Maintain HOLD, TP$0.66. CRCT currently is trading at c.12% FY09-10 DPU yield.

Results in Line 4Q08 results in line with expectations. Distributable income of S$14.1m was 23% above forecast and a 64% growth from a year ago. Gross revenues grew 75% yoy to S$31.3m, helped by contribution from the acquisition of Xizhimen. FY08 distributable income came in at S$45.8m (+43.4%), translating to a DPU of 7.53 Scts. Portfolio asset revaluation was 2.5% higher, pulled up by Xizhimen (+10%), offset by declines in values for most of its other properties.

Lower than consensus estimates.We believe that rental growth is peaking on the back of an uncertain outlook in China. As such, our DPU estimate of 7.3 in FY09, while at the lower end of consensus estimates, reflects a 10% decline in asking rents combined with increased vacancies at its multi-tenanted malls by 5-10% in 2009. In addition, potential downside risks to our DPU estimates exist if CRCT reduces its current payout ratio, against our estimated 100% payout.

Gearing level cap of 35% could mean possibility of equity raisings. While CRCT’s gearing remains relatively low amongst S-REITs at 32%, its current non-rating means that its debt-funding capacity is limited to a cap of 35%. This might lead to a possible overhang over the share price performance in the near term with unitholders facing a possible equity raising when (i) trust purchases a further asset, (ii) further devaluations in 2009, leading to the trust bursting the 35% regulatory limit.