Cache Logistics Trust - OCBC Investment 2018-01-22: Unit Prices Could Be More Compelling

Cache Logistics Trust - OCBC Investment 2018-01-22: Unit Prices Could Be More Compelling CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust - Unit Prices Could Be More Compelling

  • Trading at 7.2% FY18F yield.
  • Fair Value stays at S$0.81.
  • Maintain HOLD.

FY17 DPU from operations dropped 10% YoY 

  • Cache Logistics Trust (CACHE) reported an inline set of FY17 results. FY17 NPI dipped 0.8% YoY to S$87.3m while income available for distribution (DI) from both operations and capital dropped 4.8% y-o-y (DI from operations dropped 3.8% y-o-y). 
  • FY17 DPU from operations and capital fell 10.9% y-o-y to 6.583 S cents. Note that this number is more an accounting figure – the sum of 1Q, 2Q, 3Q, and 4Q17 DPU comes up to 6.738 S cents. 
  • FY17 DPU from operations alone fell 10.0% to 6.418 S cents. Excluding the impact of the rights issue, FY17 DPU (total) would have fallen 6.2% to 7.247 S cents. Notably, 4Q17 NPI increased 10.2% y-o-y, mainly due to the rental top-up in respect of 51 Alps Avenue and the contribution from the Spotlight warehouse. 
  • 4Q17 DPU from operations - excluding the rights issue - would have increased 3.6% y-o-y.

Active portfolio rebalancing 

  • Along with the results, Cache Logistics Trust (CACHE) also announced the proposed divestment of Hi-Speed Logistics Centre as part of its rebalancing strategy. The Hi-Speed Logistics Centre is a multi-tenanted ramp-up warehouse, which has a current occupancy rate of 74%. The consideration payable by the purchaser is S$73.8m, which is higher than the S$69.0m valuation as at 31 Dec 2017. The divestment is expected to complete in 1Q18. In this vein, we are positive on CACHE's lowered gearing of 36.3% post the rights issue, as it offers CACHE financial flexibility for future acquisitions. 
  • Management reiterated their commitment to maintaining portfolio quality. Nonetheless, we expect rental reversions to remain negative and volatile through 2018, with some stabilization towards the end of this year.
  • Our cost of equity drops 9.1% to 8.5% to reflect the lower gearing and resolution of the 51 Alps issue. After adjustments, our fair value remains at S$0.81. 
  • As at last Friday’s closing price, CACHE is trading at a 7.2% FY18F yield. With NAV per unit at 0.716 S cents as at end-2017, CACHE is trading at around 1.23x P/B. 
  • While the operational profile of the REIT has improved in the past few quarters, we believe current unit prices are not particularly compelling given the industry challenges. 
  • Maintain HOLD.

Deborah Ong OCBC Investment | 2018-01-22
OCBC Investment SGX Stock Analyst Report HOLD Maintain HOLD 0.810 Same 0.810