CACHE LOGISTICS TRUST
K2LU.SI
Cache Logistics Trust - Dilutive Placement
- Placing out SGD100m new units at SGD0.941-0.96. Units in issue would expand c.14%.
- As only SGD37m of proceeds will be for future acquisitions & SGD60m for debt repayment, highly DPU-dilutive.
- Cut FY15-17 DPU by 4-7% & TP from SGD0.97 to SGD0.95 as we tighten our yield target from 9% to 8.5%. Maintain HOLD. Prefer MINT (MINT SP, TP SGD1.49) for sector exposure.
What’s New
- Cache is placing out SGD100m new units at 94.1-96 Scts each, or 4- 6% discounts to its VWAP the day before, up to the time of its announcement.
- After deducting SGD3m for issue expenses, SGD37m will be reserved for potential acquisitions in Australia.
- About SGD60m will be used to repay debt, lowering its aggregate leverage from 39.4% to c.35.5%.
- As the placement is not connected with any specific acquisition and the money will be largely used for debt repayment, it immediately dilutes DPU. Units in issue will rise c.14%. After factoring in interest savings from reduced debt and extra earnings from an all-debt-funded acquisition in October of a Brisbane warehouse for SGD27.1m (7% NPI yield, 4% pa rental stepup), our FY15-17 DPUs drop by 4-7%.
What’s Our View
- Not positive.
- Apart from dilution, Cache’s pre-placement aggregate leverage was 39.4%, a comfortable distance from REITs’ 45% limit.
- No debt is expiring until FY17. As such, we don’t see an urgent need for new funds. Its unit price could slip by c.5% to c.SGD0.95 after this announcement, within its placement-price range. This implies an 8.5% yield on our FY16 DPU.
- As such, we tighten our yield target from 9% to 8.5%, applied to our FY16 DPU, our TP dips to SGD0.95 from SGD0.97.
- Maintain HOLD. Our yield target for Cache is still at a marked discount to Areit’s 7% and MINT’s 7.25%.
Joshua Tan
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2015-11-04
Maybank Kim Eng
SGX Stock
Analyst Report
0.95
Down
0.97
