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Cache Logistics Trust - RHB Invest 2015-10-23: Cheerless Quarter

Cache Logistics Trust - RHB 2015-10-23: Cheerless Quarter CACHE LOGISTICS TRUST K2LU.SI 

Cache Logistics Trust - Cheerless Quarter

  • 3Q15/9M15 results were within our expectations as Cache maintained 2.140 cents/6.425 cents DPU. 
  • Maintain NEUTRAL and SGD0.97 TP (2.8% total return). 
  • Overall occupancy declined further to 95.2% as it continues to be impacted by single-tenanted leases to multi-tenancies conversions. 
  • We remain cautious, given that its gearing level is slowly creeping up towards 40%, amid the difficult leasing market within the local warehouse industry.


 3Q15/9M15 results within our expectations. 

  • Cache Logistics Trust (Cache) maintained 9M15/3Q15 DPU of 6.425 cents/2.140 cents respectively, which meets 77% of our full-year estimates. 
  • We note that its overall portfolio occupancy declined further to 95.2% from 98.3% in 2Q15. This was as it was impacted by the conversion of Pandan Logistics Hub from a master lease to multi-tenancy in July, as well as the interim space available for lease at the recently-completed DHL Supply Chain Advanced Regional Centre (DSC ARC). 

 Cache extends its footprint in Australia in 3Q15. 

  • Earlier this month, the REIT announced its fourth Australian acquisition, involving a warehouse located at 203 Viking Drive, Wacol, Queensland. Cache is looking to purchase the asset for AUD27m (SGD27.1m), which translates to a cap rate of 7%. The property is to be fully master-leased to Western Star Trucks Australia Pty Ltd (WSTA) with an annual rental escalation of 4% pa. The acquisition is to be fully-funded via debt. 

 Impact of Australian acquisition. 

  • We are expecting the acquisition to be accretive as it is fully-funded by debt. Its borrowings would be fully AUD-denominated and, hence, 100% naturally-hedged. 
  • While we like the fact that it is accretive to the portfolio, management expects the average leverage ratio to increase to 39.4% from 38.3%, which we deem to be on the high side. 

 Maintain NEUTRAL with TP of SGD0.97. 

  • We increase our FY15/FY16 DPU estimates by 0.6%/2.5% respectively, as we factor in the ongoing acquisition of the warehouse in Australia. 
  • However, in view of a difficult leasing market within the Singapore warehouse industry, we remain cautious and maintain our NEUTRAL call on the stock with a DDM-based TP of SGD0.97.




Ivan Looi RHB Research | Ong Kian Lin RHB Research | http://www.rhbinvest.com.sg/ 2015-10-23
RHB Research SGX Stock Analyst Report NEAUTRAL Maintain NEAUTRAL 0.97 Same 0.97


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