Cache Logistics Trust - OCBC Investment 2018-04-26: CWT Commodity Hub Conversion

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CACHE LOGISTICS TRUST K2LU.SI

Cache Logistics Trust - CWT Commodity Hub Conversion

• Cache Logistics Trust’s results within expectation.
• 7.3% FY18F yield as at 25 Apr close.
• Fair Value drops slightly to S$0.83.

Revenue up 7.3% on Aussie acquisition

• Cache Logistics Trust’s (CACHE) 1Q18 results were within expectation. 
• 1Q18 revenue increased 7.3% y-o-y to S$29.0m – or 23.8% of our initial full-year forecast – mainly due to the acquisition of nine warehouses in Australia which was completed on 15 Feb 2018. Correspondingly, 1Q18 distributable income from operations increased 5.5% y-o-y to S$16.1m or 23.6% of our initial full-year forecast. 
• There is no distributable income from capital this quarter vs. the S$0.9m distributed in 1Q17. 
• Mainly due to the rights issue, 1Q18 total DPU fell 12.5% y-o-y to 1.507 S cents or 23.7% of our initial full-year forecast. DPU from operations fell 7.2% y-o-y. 
• Gearing now stands at 38.5%, but will be reduced to 35.2% after the repayment of debt from the sale proceeds of 40 Alps Avenue.

Conversion to multi-tenanted leases at CWT Commodity Hub

• We expect the challenging environment within the industrial space to continue for at least the rest of the year. However, only 6.7% of CACHE’s leases by gross rental income are up for renewal for the remainder of this year. 
• Going forward, we focus more on the additional contribution from the Australian acquisition as well as the conversion of CWT Commodity Hub from master lease to a multi-tenancy lease on 12 Apr 2018. So far, the asset has achieved a committed occupancy of 86% beyond the expiry of the master lease with CWT. CWT itself continues to lease around 61% of the premises. 
• We are slightly concerned with the remaining 14% in uncommitted occupancy at the asset and expect any new leases to be signed at lower rental rates.

Positive on the portfolio rebalancing

• After slight adjustments, our fair value decreases from S$0.85 to S$0.83. 
• We continue to be positive on the Australia acquisition given the longer WALE and a higher proportion of freehold assets. Australia’s proportion in CACHE’s portfolio now stands at 28%. 
• Nonetheless, unit prices as of 25 Apr do not look particularly attractive. 
• As at 25 Apr’s closing price of S$0.83, CACHE is trading at a 7.3% FY18F yield. With the NAV per unit at S$0.705 as at 1Q18, CACHE is trading at around 1.18x P/B. 
• Maintain HOLD.

Deborah Ong OCBC Investment | http://www.iocbc.com/ 2018-04-26

SGX Stock Analyst Report HOLD Maintain HOLD 0.83 Down 0.850