Any forecast changes will also have to take place after CLCT’s results for the 1HFY2025 ended June, which will be announced on July 30.
Despite the downgrade, Lim has increased her fair value estimate, or target price, to 76.5 cents from 71.5 cents as she lowers her risk-free rate input by 50 basis points to 2.25%. Lim's target price is 3.16% below CLCT's last-closed price of 79 cents as at her July 22 report.
While the analyst sees the C-REIT as a possible platform for CLCT to recycle its mature assets and to gain exposure to a new investment vehicle with an expected yield of 4% to 5%, the transaction is likely to be dilutive if the trust uses its proceeds to repay debt. Of the proceeds, CLCT says it will spend an estimated $20.7 million or 15.3% of the total amount to acquire a 5% stake in CLCR. The remainder may be used to repay debt or conduct unit buybacks, although management seems more inclined towards the former, says Lim. As such, the analyst believes there are downside risks to her existing distribution per unit (DPU) estimates.
“We continue to view CLCT as a beneficiary of China’s pro-growth policies. While the Chinese market has performed well year-to-date, it is still early days, in our view, to comment on whether the recovery in consumer spending and sentiment is sustainable given ongoing tariff and geopolitical uncertainty,” Lim writes.
See also: OCBC's Lim cuts fair value for SingPost to 49.5 cents
As at 3.42pm, units in CLCT are trading flat at 78 cents.
