CACHE LOGISTICS TRUST
K2LU.SI
CACHE LOGISTICS TRUST 3Q15 ~ Looking to cash in on Australia.
RESULTS
• Results in line with expectations.
- Cache Logistics Trust (Cache) reported a 3Q15 DPU of 2.14 S cents (0.0% yoy, 0.0% qoq). The results are in line with our expectations, with 9M15 DPU of 6.426 S cents representing 75.1% of our full-year 2015 forecast.
- Completion of the DHL BTS project saw portfolio occupancy decline 3.1ppt qoq, reaching 95.2% in the quarter. Gearing saw an uptick of 0.3 ppt qoq to hit 38.3% in the quarter, while 65% of borrowing has been hedged against interest rate risk. No refinancing is required till 2017 (17.7% of borrowings due).
IMPACT
• Leasing in 2015 taken care of.
- Cache has a paltry 1% of leases by NLA left for renewal, with the bulk of 2015’s expiring leases already forward renewed. 2016 will see 15% of leases by NLA due, with two master leases (Schenker and Hi-Speed) accounting for 12% in 2H16. Located near Changi Airport, management has expressed confidence in the attractiveness of Schenker MegaHub and Hi-Speed Logistics to logistics players.
• Lower occupancy seen as DHL Built-to-suit (BTS) development saw completion.
- With the Advanced Regional Centre (ARC) attaining TOP, and inclusion into the portfolio, Cache saw a dip of 3.1 ppt qoq in occupancy. This came from the unlet space (170,600 sf by NLA) in Block 2 which is 19% occupied by short-term tenants. Recall that DHL will only start to occupy Block 2 from Year 3 onwards. (50% in Year 3, remaining 50% in Year 5). Meanwhile, Block 1 (717,600 sf by NLA, or 77% of the project NLA) has seen 100% occupancy, with DHL to commence rental payments in Jan 2016.
• Looking to cash in on Australia…
- Australia looks particularly attractive to management notwithstanding higher taxes, primarily for its freehold land titles (JTC: 30 years), and transparent policies as opposed to China’s. Cache's fourth Australian acquisition announced earlier this month came on the heels of the acquisition of three Australian properties earlier this year. We estimate that Australia should account for about 8.1% of portfolio value once the acquisition is complete, which is line with management’s stated strategy of expanding its footprints in Australia.
• … as domestic outlook continues to look bleak.
- Management voiced concern over the lacklustre domestic economy, noting the third consecutive drop in the PMI to 48.6 last month. This would also be the lowest reading registered since Dec 12. These, and the relatively sombre growth of domestic GDP in 3Q15, underpin the ongoing push overseas.
RECOMMENDATION
- Maintain BUY with an unchanged target price of S$1.24, based on DDM (required rate of return: 6.8%, terminal growth: 1.3%).
Singapore Research Team
UOB Kay Hian
|
http://research.uobkayhian.com/
2015-10-22
UOB Kay Hian
SGX Stock
Analyst Report
1.24
Same
1.24
