CACHE LOGISTICS TRUST
K2LU.SI
Cache Logistics Trust (CACHE SP) - Underlying improvements
2Q results; improving underlying trends
- 2Q results were in line, forming c.50% of estimates.
- More importantly, there are signs of success in filling vacancies despite the over-supply headwinds.
- Management is also fairly confident that in the worst-case scenario of C&P not renewing its master-lease at Shenker Megahub, Cache has legal recourse to damages of double rent payable.
- Maintain BUY, unchanged TP of 94 Scts, and yield peg of 9%.
Results in line; capital distributions end
- Rev/NPI increased 30%/22% respectively, powered by new building DSC- ARC (started contributing in 1Q16) and the six Australian logistics properties acquired in 2015.
- DPU however declined to 1.99 Scts (-2.5% QoQ, -7.1% YoY) due to an absence of capital distribution top-ups, which averaged SGD 1.7m/qtr from 2Q15-1Q16, as well as due to a larger unit base from 4Q15’s 14% dilutive placement.
Vacancies being filled
- The key thing to note is that without the capital distributions in 1Q16 and 2Q15, DPU would have increased 10% QoQ and 2% YoY.
- Operations are improving, as portfolio occupancy increased QoQ to 95.8% (1Q: 94.2%). Phase 2 of DSC-ARC, 210k sf (Phase 1: 718k sf), which was supposed to be occupied by DHL in FY18/19, has been c.45% filled in the interim. The extra income slightly more than offsets income lost from Hi-Speed’s conversion from master-lease to multi-tenanted.
- FY16-18 DPU is tweaked marginally higher by 0.6%.
Double protection
- Recalling the issue of sub-tenant Shenker’s rent dispute with master-tenant C&P at Shenker Megahub. Cache maintains that if C&P does not renew its master-lease and fails to deliver the Megahub in vacant possession, then Cache is able to seek damages from C&P to the tune of double rent payable under their master lease agreement for the duration that the sub-tenant remains.
- The worst-case scenario would be both leave the property, but Cache is fairly confident Shenker would stay. This is because the property is purpose built for them, with fresh capex sunk- in, and a dearth of alternatives at the Airport Logistics Park, a free trade zone.
Joshua Tan
Maybank Kim Eng
|
Derrick Heng CFA
Maybank Kim Eng
|
http://www.maybank-ke.com.sg/
2016-07-21
Maybank Kim Eng
SGX Stock
Analyst Report
0.94
Same
0.94
