CACHE LOGISTICS TRUST
K2LU.SI
Cache Logistics Trust (CACHE SP) - DPU may slightly decline
FY15 a disappointing year. Maintain HOLD
- Maintain HOLD on Cache as DPU could decline slightly.
- The operating environment remains tough, and there is risk of further dilution.
- We loosen Cache’s yield target from 8.5% to 9% (the cycle average) on account of these risks, applied to FY17’s DPU, which was raised by 3.4% due to acquisitions made in 4Q15.
- TP lowers from SGD0.95 to SGD0.93.
No flow thru to DPU due to dilution
- 4Q15 revenue grew 16.6% YoY as six logistics properties in Australia were acquired over the course of FY15. However, 4Q DPU declined 3.4% YoY due to the SGD100m placement in Nov, of which SGD60m was used to pare down debt.
- The remaining SGD40m helped fund three of the Australian properties acquired in 4Q15. But as the pricing of the placement was 8.9% vs the targets having a blended yield of 8.2%, the non-accretion was a further drag on DPU as well.
Leasing underperformed
- Overall, FY15 was a disappointing year. Full-year revenue grew 8.3% YoY but DPU declined 0.9% YoY (101%/102% of forecast) on account of the dilution but also because occupancy fell steadily throughout the year from 99.1% in 1Q to 94.9% in 4Q.
- Rent reversions were estimated to be in the negative single digit.
DPU to slightly decline; dilution risk
- The DPU outlook for Cache is slight declines.
- We started FY15 anticipating 9 Scts DPU for FY16, due to contributions from the build-tosuit property with DHL, but the dilution from the placement hammered that down to 8.1 Scts.
- Subsequently the acquisition of the last three Australian properties lifts our FY16-17 estimates to 8.3/8.4 Scts, slightly lower than FY15. Further growth from acquisitions is becoming increasingly tough for Cache as its traded yield of almost 10% is about 200-300bps above NPI yields of Aussie logistics assets, while its leverage at almost 40% limits how much debt it can take on in order to mix funding for yield accretion.
- Further dilution risk cannot be discounted.
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
0.93
Down
0.95
