CACHE LOGISTICS TRUST
K2LU.SI
Cache Logistics Trust - Year of Consolidation
Maintain BUY, with lower TP of S$0.96
- Yield of close to 10%, one of the highest in the S-REITs sector, is attractive in our view.
- Despite a hazy operational outlook, we believe that the negatives are priced in and current price level is attractive level to accumulate.
Australia acquisitions / DHL project to support earnings in 2016-2017.
- Cache’s Singapore portfolio is expected to see rental pressure from
- conversions of single-user properties to multi-tenanted properties, and
- heightened competition due to new supply.
- As such, growth will mainly be driven from its recent acquisitions such as the six properties in Australia and contribution from DHL development project.
Limited acquisition capacity as gearing nears 40%
- Gearing is estimated to hover around 38% over the coming two years, which is at the higher end of management’s comfortable range of 35-40%.
- This means that further debt capacity is likely to be limited and further acquisitions are likely to be funded through a mix of debt and equity.
Valuation:
- Our target price is adjusted to S$0.96 as we account for higher vacancy rates and rental reversion estimates.
- Maintain BUY, given attractive yield of close to 10%.
Key Risks to Our View:
- Interest rate risk. Higher interest cost is expected to eat into distributions.
- We note that the Manager has locked in close to 67% of its debt into fixed-rates.
Derek Tan
DBS Vickers
|
Mervin Song CFA
DBS Vickers
|
http://www.dbsvickers.com/
2016-01-26
DBS Vickers
SGX Stock
Analyst Report
0.96
Down
1.09
