Cambridge Industrial Trust - CIMB Research 2016-04-29: A hardy 1QFY16

Cambridge Industrial Trust - CIMB Research 2016-04-29: A hardy 1QFY16 CAMBRIDGE INDUSTRIAL TRUST J91U.SI 

Cambridge Industrial Trust - A hardy 1QFY16 

  • 1Q16 underlying DPU of 1.11 Scts (+3.8% yoy) was in line with consensus and our estimates, forming 26% of our full-year forecast. 
  • Performance was aided by acquisitions and completion of AEI projects. Excluding which, we deem that organic growth could have been slightly negative yoy. 
  • 1Q positive rental reversion of 2.9%, retention rate of 89% and occupancy at 94.1%. 
  • Focus on Australia for acquisitions. Entered into an agreement with C&G. 
  • Hold call and target price intact. We may revisit upon yield-accretive acquisitions. 

1Q16: a hardy quarter

  • CREIT delivered a steady performance for 1Q16. 
  • Headline DPU registered a 9.2% yoy decrease. However, underlying numbers would reflect a 3.8% yoy increase if we were to adjust 1Q15 results to reflect management fees wholly paid in cash and strip out the S$1.1m capital distribution. 
  • 100% of management fees were paid in cash in 1Q16 vs. 50% cash/50% units paid in 1Q15. 

Aided by acquisitions and completion of AEI projects

  • Aided by additional revenue from acquisitions and AEI (Asset Enhancement Initiatives) projects completed in 1Q15, gross revenue improved 3% yoy to S$28.4m. 
  • NPI was marginally up by 1% yoy to S$21.5m due to a higher proportionate increase in costs, owing to the effects of the conversion of multi-tenanted buildings (MTBs). 
  • 1Q16 NPI margins were flat qoq at 75.8%. 
  • Excluding acquisition and AEI effects, we deem that organic growth could have been slightly negative yoy. 

Portfolio performance

  • Portfolio occupancy remained at 94.1% qoq with a WALE of 3.6 years. 
  • CREIT re-leased c.111,000 sq ft of space with a weighted positive rental reversion of 2.9% (driven by single-tenant leases). 
  • Retention rate in 1Q16 was 89%. The average portfolio rental remains unchanged at S$1.27 psf. 
  • AEI works at 86 International Road were completed and obtained its TOP (Temporary Occupation Permit) in the quarter. 

Entered into an agreement with C&G

  • In conjunction with the results, CREIT announced that it has entered into an agreement with Commercial and General (C&G), an Australian industrial property specialist. 
  • C&G could potentially co-invest with CREIT when suitable properties are found.
  • In addition, CREIT is looking to divest two non-core assets in 2016, one of which is 23 Tuas Ave 10 which is targeted for divestment in Jun for S$16.5m or 5% above valuation. 

Maintain Hold

  • We tweak our DY16 DPU by 0.4% and keep our DDM-based target price (S$0.57)
  • We reiterate our Hold call in view of weak demand and incoming supply. 
  • Meanwhile, MTB conversions are expected to continue to impact NPI margins in FY16. We could revisit the stock upon yield–accretive acquisitions.

YEO Zhi Bin CIMB Securities | LOCK Mun Yee CIMB Securities | http://research.itradecimb.com/ 2016-04-29
CIMB Securities SGX Stock Analyst Report HOLD Maintain HOLD 0.57 Same 0.57