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.

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 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 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.

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.

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