Cache Logistics Trust - UOB Kay Hian 2017-04-21: 1Q17 Results In Line

REITs − Singapore - UOB Kay Hian 2017-04-21: 1Q17: Results Of CMT (In Line) And Cache (In Line) CAPITALAND MALL TRUST C38U.SI CACHE LOGISTICS TRUST K2LU.SI

REITs − Singapore - 1Q17: Results Of Cache (In Line)

  • Cache’s results are in line with expectations. Its geographical diversification strategy remains paramount to management. 
  • Legal proceedings at 51 Alps are still underway. 
  • Maintain BUY on Cache with a target price of S$0.95. 
  • Maintain OVERWEIGHT on the REITs sector.



WHAT’S NEW

  • Cache Logistics Trust (Cache) has reported their quarterly results.


ACTION 

  • Results in line with expectations, maintain BUY with a target price of S$0.95, based on DDM (required rate of return: 6.9%, terminal growth: 0.9%). 
  • Cache reported 1Q17 DPU of 1.80 S cents, -11.7 % yoy. Excluding capital gains paid out last year, 1Q17 core DPU declined 8.5% yoy. 
  • 1Q17 gross revenue contracted 2.9% yoy, mainly attributable to the divestment of Changi Districentre 3 and lower rental from 51 Alps. 
  • 1Q17 NPI also fell 5.8% yoy, on the back of higher expenses from conversion of master leased assets to multi-tenancies.
  • The results came in line with expectation, with 1Q17 DPU of 1.80 S cents representing 24.6 % of our full-year estimate.

Portfolio reconstitution. 

  • The REIT Manager has reiterated its strategy to expand its footprint in Australia (currently 16% of asset value).  With limited debt headroom (gearing: 43.1%), this move will likely be funded through capital recycling, by means of divesting of lower-yielding Singapore assets. 
  • In 1Q17, Cache completed the A$22.5m acquisition of an asset in Melbourne by deploying proceeds from the divestment of Cache Changi Districentre 3. We do not rule out the potential divestment of Cache Cold Centre and Pandan Logistics Hub, collectively valued at S$180m, to fund acquisition-led growth in Australia.
  • DHL ARC to provide degree of stability, which is 96% occupied (anchor tenant DHL’s occupancy at 83%, other 13% on interim leases) with DHL on a long rental lease of about 10 years, thus providing clear earnings visibility. DHL already occupies Block 1 and also previously took up a quarter of Block 2, fast-forwarding its initial plans to take up half of Block 2 in 4Q17, before occupying the other half in 4Q19.

Legal proceedings for Schenker Megahub still underway. 

  • Under the holding rental arrangement in place, Cache currently receives rental income of S$0.77 psf (under protest) as opposed to market rents of about S$1.40-1.50 psf pm.




Vikrant Pandey UOB Kay Hian | Derek Chang UOB Kay Hian | http://research.uobkayhian.com/ 2017-04-21
UOB Kay Hian SGX Stock Analyst Report HOLD Maintain HOLD 1.950 Same 1.950
BUY Maintain BUY 0.950 Same 0.950



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