Cache Logistics Trust - Phillip Securities 2016-01-21: Prospecting Down Under

CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust - Prospecting Down Under

Earnings preview and update on the recent acquisitions of three properties in Australia.
The portfolio now consists of nineteen warehouse properties; located in Singapore (12), Australia (6) and China (1).
The Private Placement increases the outstanding units by 13.5%; and an advanced distribution of 0.9 cents was paid.
Downgrade to Neutral and cut target price from S$1.11 to S$0.94.

Cache completed the acquisition of three warehouses in Australia during 4Q15. This expands Cache's footprint in Australia from the existing three properties acquired earlier in 1Q15 – more than doubling the Australian portfolio's GFA to 135,035 sqm from 56,601 sqm; and increasing the overall portfolio's GFA by 12.7% to 7.5 mn sqft (697,170 sqm).

S$100mn was raised through a Private Placement of 106,270,000 units at an issue price of S$0.941 per unit. This increases the outstanding number of units by 13.5%, from the existing total of 785,576,123 units.
In conjunction with the Private Placement, an advanced distribution of 0.9 cents per unit was declared for the period from 1 October 2015 to 12 November 2015, being the day immediately preceding the issue of the new units. The advanced distribution was paid on 29 December 2015.

WALE The three properties are situated on freehold land, thus extending the portfolio's weighted average land lease expiry. The three properties are on Master leases with 4.6 to 7.9 years remaining.
The portfolio's WALE was extended to 4.46 years, from 4.3 years as at 3Q15.

The three acquisitions raise FY16e NPI by c.7%, by our estimates. However, the increase in number of units by 13.5% is DPU-dilutive.
We view the advanced distribution as equitable to the existing unitholders.
We estimate about 0.7 cents core-DPU (excluding proceeds from disposal of Kim Heng) to be declared for the remainder of 4Q15 (13 November 2015 to 30 December 2015) to the enlarged unitholder base. This brings total DPU of about 1.6 cents for 4Q15 to the original unitholders (0.9 cents advanced distribution and 0.7 cents final distribution).

Our forecast model shows a trend of lowering DPU y-o-y.
We lower our terminal growth assumption to 0%, and downgrading Cache to "Neutral" rating with lower DDM-backed valuation of S$0.94 (previous valuation: S$1.11), giving an implied 0.98x FY16e P/NAV.

Richard Leow CFTe Phillip Securities | http://www.poems.com.sg/ 2016-01-21

Phillip Securities SGX Stock Analyst Report NEUTRAL Downgrade ACCUMULATE 0.94 Down 1.11