Cache Logistics Trust - DBS Research 2018-08-01: According To Plan In 2Q18

Cache Logistics Trust - DBS Group Research Research 2018-08-01: According To Plan In 2q18 CACHE LOGISTICS TRUST SGX:K2LU

Cache Logistics Trust - According To Plan In 2Q18

  • Cache Logistics Trust’s 2Q18 DPU of 1.419 Scts – in line.
  • Higher occupancy at CWT Commodity Hub at 92.7% in June 2018 vs 86% in April 2018.
  • Plans to leverage on ARA’s network to drive acquisition- led growth in Asia.
  • Maintain HOLD; Target Price of S$0.88.

What’s New

2Q18 DPU of 1.419 Scts (-17.6% y-o-y).

  • Cache Logistics Trust’s NPI held relatively steady at S$21.6m on c.7.7% y-o-y improvement in topline to S$30m in 2Q18. The uptick in revenue was largely driven by the acquisition of 9 warehouse properties in Australia on 15 Feb 2018, whilst flattish NPI was mainly due to higher property expenses on the back of CWT Commodity Hub’s conversion from a master lease to a multi-tenancy lease structure.
  • Distributable income fell 6.3% y-o-y to S$15.2m, resulting in a 17.6% drop in DPU on an enlarged share base. This was in line with our expectations, with 1H18 DPU of 2.926 Scts forming 49% of our FY18F estimates.

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Operating metrics improve.

  • In addition to strong portfolio occupancy of 96.8%, we were also comforted by the sequential improvement in underlying occupancy at CWT Commodity Hub 92.7% (June 2018) from 86% in April 2018, post the expiry of the master lease.
  • Cache Logistics Trust’s rental reversions (excluding CWT Commodity Hub) while still negative, narrowed to -4% for 2Q18 (vs -4.8% for 1H18). Given improving supply-demand dynamics, Cache is cautiously optimistic of the bottoming out of the warehouse market by end-2018, which could help drive a pick-up in rents from 2019F.
  • While tenant diversification has improved substantially since April 2018, we note that CWT still remains the largest single tenant at c.23.9% of gross rental income.

Healthier gearing levels.

  • Cache Logistics Trust’s gearing levels improved sequentially from 38.5% (Mar-18) to 35.3% (June-18) following a partial repayment of debts using proceeds from its rights issue and divestment of 40 Alps Ave. Average cost of debt nudged higher from 3.5% to 3.61% over the quarter.

Casting its net wider?

  • The Manager shared that their attention is on ARA’s network in the Asia Pacific region. While Australia remains attractive for Cache, Korea may also be of interest for the REIT given freehold land tenures.

Carmen TAY DBS Group Research Research | Derek TAN DBS Research | https://www.dbsvickers.com/ 2018-08-01
SGX Stock Analyst Report HOLD Maintain HOLD 0.880 Same 0.880