CACHE LOGISTICS TRUST
K2LU.SI
Cache Logistics Trust (CACHE SP) - All clear if Shenker and Hispeed leases are renewed
Flat DPU outlook; Still cheap despite re-rating 1Q16 results are in line.
- Underlying occupancy remains stable.
- We maintain BUY, TP unchanged at SGD0.94, derived by applying our yield peg of 9% to FY16-18 blended DPU.
- Cache is now trading at 9.4% yield, and the re-rating since our 4 Apr report suggests it offered deep value at 10.1% yield.
- We still think it has room to re-rate higher to the mean (9%) as industrial peers are trading at -1SD below the mean.
Results in line; Occupancies stable
- Cache’s results met our expectations, with revenue/DPU at 26%/24% of estimates.
- Contributions from Australian acquisitions and the build-to-suit for DHL caused revenue/NPI to surge 32.7%/12% YoY. But as forecast, there is no flow through to DPU (-5% YoY) due to higher interest cost from debt taken to fund those acquisitions and c.9% dilution from equity fund raising.
- Underlying trends seem fairly stable as occupancy was 94.2% (4Q15: 94.9%), a result of occupancy transitions.
Few lease expiries during the supply years
- Singapore warehouse supply is formidable for 2016-17 but will tighten dramatically in 2018.
- As a percentage of rent, Cache’s portfolio lease expiry profile for 2016-17 is thankfully small, just 10.9%/2.6%.
- Nonetheless, tenant demand is guided weaker this year compared to last year, and we conservatively dock our DPUs c.1.5% for FY16-17 (oversupply years), and raise FY18 DPU 1.6% (tight supply year).
Downside is fairly well priced in
- In our 4 Apr 2016 report, we flagged that Cache was a deep value play. The 10.9% lease expiry relates to Shenker Megahub and Hi-speed logistics (renewing Aug/Oct 2016), two properties located in the Airport Logistics Park of Singapore, a Free Trade Zone next to Changi Airport. Such attributes make the properties sought after.
- Our worst case scenario would be a multi-tenanted conversion, which could knock DPUs to 8.0/8.0 S cts in FY16-17.
- At today’s price, that would be a yield of 9%, which is the mean of this cycle’s trading history. The downside is therefore fairly well priced in.
Joshua Tan
Maybank Kim Eng
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http://www.maybank-ke.com.sg/
2016-04-25
Maybank Kim Eng
SGX Stock
Analyst Report
0.94
Same
0.94
