Cache Logistics Trust - RHB Invest 2016-06-01: Dispute with a Sub-tenant

CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust: Dispute with a Sub-tenant

Cache Logistics Trust (Cache SP, Neutral TP: SGD0.86) has been dragged into a dispute, filed by its sub-tenant Schenker over rent issues. The main conflicts arose as the German logistics company (Schenker) demanded its anchor lease to be renewed at a rental rate pre-agreed with C&P Land. The lease expires on the 31 Aug 16.

However, Cache has pointed out that this the rental agreement is between both C&P and Schenker, and therefore plays no involvement in the matter itself. We also understand from the REIT that it has already approached C&P on renewing its master lease, though the latter has not responded with its intention yet.
We think that this is an indication that the overall warehouse leasing environment is a challenging one. Tenants are unwilling to commit early, and are resisting to pay a higher revised rental fee in the current climate. In the worst case scenario, where we assume that C&P does not renew its master lease with Cache, we estimate that it would impact c.9% of its FY16 DPU.
Note that we have not imputed this in our estimates as we await clarity to the pending law suit. Maintain Neutral on Cache.

Ivan Looi RHB Invest | http://www.rhbinvest.com.sg/ 2016-06-01

RHB Invest SGX Stock Analyst Report NEUTRAL Maintain NEUTRAL 0.86 Same 0.86