Cache Logistics Trust - CIMB Research 2017-09-05: Would It Be A Case Of Déjà Vu?

Cache Logistics Trust - CIMB Research 2017-09-05: Would It Be A Case Of Déjà Vu? CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust - Would It Be A Case Of Déjà Vu?

  • CACHE has announced a rights issue to raise gross proceeds of S$102.7m.
  • Proceeds would be used to pare down debt.
  • We expect gearing to decrease to 35.3%. Factoring in S$3.5m interest cost savings p.a. plus the rights issue, we cut our FY17F-19F DPU forecasts by 3.5-10.5%.
  • Judging from its previous equity fund raising in 2015, we would not be surprised if CACHE acquires Australian assets in the next couple of months.
  • In the near-term, we expect unit price to come under pressure from this pre-emptive rights issue. Maintain Reduce with a lower DDM-based target price.



Pre-emptive rights issue to raise gross proceeds of S$102.7m 

  • CACHE has announced an underwritten and renounceable rights issue of 162.6m new units to raise gross proceeds of S$102.7m (net proceeds of S$2.8m). The rights will be offered at the ratio of 18 rights for every 100 units at S$0.632/right (24.9% discount to theoretical ex-right price). 
  • Both ARA and CWT have provided irrevocable undertakings to subscribe for their respective allotment of rights, which represents 7.3% of the right units.
  • Ex-date is on 08 Sep 2017.


Gearing to decrease to 35.3%; cut FY17F-19F DPU by 3.5-10.5% 

  • Proceeds from the rights issue would be used to pare down debt. We note that S$192m of S$-debt would be due in 2019. 
  • Post-completion of the rights, we estimate CACHE’s gearing to decrease to 35.3% (2QFY17: 43.4%). Factoring in S$3.5m interest cost savings p.a. plus the rights issue, we cut our FY17F-19F DPU forecasts by 3.5-10.5%.
  • We calculate NAV to drop to S$0.743/unit at end-FY17 (2QFY17: S$0.77/unit).


We are rather surprised 

  • We previously thought the manager could divest its non-core Singapore assets to bring down gearing. 
  • In addition, while we understand that it could be difficult to control timing/ circumstances, we are of the view that accompanying acquisitions with equity fund raising would be more palatable for the market.


Would it be a case of déjà vu? 

  • Nonetheless, CACHE is continuing its portfolio rebalancing and growth strategy with a focus in Australia. We note that in 2015, CACHE acquired two additional warehouses in Australia within a month or so after its S$100m private placement in Nov. 
  • In its latest acquisition of the Spotlight warehouse in Australia (Feb 17), it managed to time/fund the acquisition with proceeds from the divestment of Cache Changi Districentre 3 in Nov 16. 


Maintain Reduce, TP decreased to S$0.76 

  • Judging from its previous equity fund raising, we would not be surprised if CACHE acquires further Australian assets in the next few months to make up for the DPU-dilution from the rights issue. 
  • In the near-term, we expect unit price to come under pressure from this pre-emptive rights issue. 
  • We keep our Reduce call, with a lower DDM-based target price of S$0.76 (on the back of DPU downgrades). 
  • Upside risks to our call would be further accretive-acquisitions and faster recovery in the Singapore logistics market.




YEO Zhi Bin CIMB Research | LOCK Mun Yee CIMB Research | http://research.itradecimb.com/ 2017-09-05
CIMB Research SGX Stock Analyst Report REDUCE Maintain REDUCE 0.76 Down 0.840



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