Cache Logistics Trust (CACHE SP) - Maybank Kim Eng 2017-10-25: Pedestrian Results, Adjusting For Rights Issue

Cache Logistics Trust (CACHE SP) - Maybank Kim Eng 2017-10-25: Pedestrian Results, Adjusting For Rights Issue CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust (CACHE SP) - Pedestrian Results, Adjusting For Rights Issue

3Q17 in line, TP cut 7% to SGD0.85 

  • We have cut Cache Logistics Trust (Cache)’s DPUs by 11-14% to factor in the recently completed SGD102.7m rights issue discounted at 23-28%, and following 3Q17 results.
  • Cache reported YoY and QoQ declines in revenue and NPI, against -5% portfolio rental reversion and softer occupancies at 97.3% (-1% QoQ); a rising contribution from the Australian assets partly mitigated weaker fundamentals at its S’pore core. 
  • Cache’s gearing now at 35.7%, suggests SGD82-213m in debt headroom for acquisition growth. However, with share overhang from Schenker, and warehouse oversupply, we maintain HOLD, to our new SGD0.85 TP. 
  • We prefer Ascendas REIT (AREIT SP, Rating: BUY, Target Price: SGD 2.90) for its S’pore business parks exposure.

Operationally weak quarter 

  • Cache’s performance in 3Q17 was driven by contributions from its DHL Supply Chain ARC, Cache Cold Centre, and the Australian portfolio. These helped offset lower revenue from 51 Alps Ave and Changi Districentre 3 (divested in Jan 2017). 
  • Portfolio occupancy fell QoQ from 98.3% to 97.3%, while DPU declined 12.8% YoY to Sct1.54 (-1.6% YoY excluding the rights issue impact). 
  • Following a SGD0.57m distribution, Cache has SGD0.61m in residual sales proceeds from its Kim Heng warehouse divestment.

Aggregate leverage down to 35.7% post-rights 

  • Aggregate leverage rose QoQ from 43.4% to 43.6% but fell to 35.7% as the bulk of its SGD102.7m raised from the (18-for-100 and SGD0.632/rights) rights issuance were used to repay borrowings post-3Q. Borrowing costs were stable at 3.46%, whilst Cache’s debt headroom has increased to SGD81.6m/SGD213.4m at the respective 40%/45% gearing thresholds. 
  • We see limited financing/currency risks, with hedging of 69.7%/50.0% of its SGD/AUD onshore loans into fixed rates and 94.1% of its distributable income hedged/derived in SGD. Management continues to eye acquisition growth opportunities from Australian third-party assets.

Schenker remains status-quo, overhang stays 

  • Cache has not provided updates on its 51 Alps Ave (Schenker Hub) asset, but management remains confident of a year-end resolution. 
  • Within subsectors, we continue to see a more challenging outlook for warehouses, as new 2017 supply adds 12% to total stock, vs 4.5% for factories and 0.2% for business parks. 
  • Remain HOLD with new SGD0.85 TP.

Chua Su Tye Maybank Kim Eng | 2017-10-25
Maybank Kim Eng SGX Stock Analyst Report HOLD Maintain HOLD 0.85 Down 0.950