Cache Logistics Trust - RHB Invest 2016-01-26: Nothing Interesting Right Here

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CACHE LOGISTICS TRUST K2LU.SI 

Cache Logistics Trust (CACHE SP) - Nothing Interesting Right Here 

• Cache booked a negative set of results as it suffered lower occupancy levels and ~SGD65m revaluation losses in FY15; also its gearing ratio remained high at 39.8%. 
• Maintain NEUTRAL with a lower DDM-based SGD0.86 TP (from SGD0.97, 1% downside), which implies 0.98x FY15 P/BV. 
• Results were in line with our expectations. 
• Despite the pessimistic outlook, we think its c.10% yield should provide some support to its share price. 

 Results came in within expectation. 

• Cache Logistic Trust’s (Cache) 4Q15 results were in line, as it met c.102% of our full-year forecast. 4Q15/FY15 DPUs for the quarter were down 3.4/0.9% YoY respectively. 
• In addition, net property income (NPI) for the quarter was down 1% YoY, mainly due to the conversion of several properties from master lease to multi-tenancy in 2015. 
• Cache’s gearing ratio remained on the high side at 39.8%, with no refinancing requirement till 2017. 

 Portfolio was impacted by lower occupancy rate. 

• Cache’s portfolio occupancy suffered a dip to 94.9% after the conversion of four master leased properties to multi-tenanted ones in FY15. 
• We expect further headwinds within its portfolio, given that 12% (out of total gross rental income) of its portfolio would face expiry in 2016. 
• Furthermore, the unfavourable supply-demand dynamics within the warehouse industry is likely to provide further pressure on the REIT’s performance this year. 

 Cache suffered revaluation losses of almost SGD65m. 

• We note that Cache registered SGD64.7m in revaluation losses mainly on shorter land tenure, a drop in market rent and anticipated slower rental growth by the independent valuers. However, the average cap rate used by the valuers was 20bps lower than the previous ones for its Singapore portfolio. 

 Maintain NEUTRAL recommendation with a lower TP of SGD0.86. 

• Despite the following pessimistic outlook for Cache, namely: 
  1. the unfavourable supply-demand dynamics within the warehouse leasing market (which should provide pressure), and 
  2. conversion of single-user assets to multi-tenanted ones to put further pressure on NPI margins, 
  we remain NEUTRAL as we think the dividend yield of c.10% should limit the downside for its share price.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-01-26

RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.86 Down 0.97