Cache Logistics Trust - Maybank Kim Eng 2018-07-31: Better Equilibrium

Cache Logistics Trust - Maybank Kim Eng Research 2018-07-31: Better Equilibrium CACHE LOGISTICS TRUST SGX:K2LU

Cache Logistics Trust - Better Equilibrium

2Q18 in line; BUY

  • Cache Logistics Trust's 2Q18 DPU of SGD1.42cts is in line, at 46% of our FY18E.
  • DPU fell 17.6% y-o-y from a 13.7% increase in units and lower NPI following the conversion of CWT Commodity Hub into multi-tenancies and divestment of its Hi-Speed Logistics Centre property in May. These were partly offset by nine new Australian properties, which lifted Australian revenue contributions from 20% to 23%.
  • Cache has delivered on boosting its Commodity Hub committed occupancy, and we see stronger growth as rents stabilise and leasing demand picks up. Our forecasts and DDM-based Target Price are unchanged (WACC 7.8%, LTG 1.5%). BUY.

Singapore rental reversions -4.0%

  • Revenue jumped 7.7% y-o-y while NPI was lower by 0.1% y-o-y. There were incremental contributions from its nine-property Australian portfolio acquired in Feb 2018 and 51 Alps Ave with a new lease in place and rental top-up. These were offset by the conversion of its master lease at CWT Commodity Hub to multi-tenancies in April and divestment of Hi- Speed Logistics Centre in May.
  • 2Q18 DPU fell 17.6% y-o-y to SGD1.42cts as its Sep 2017 SGD100m rights issuance expanded its unit base by 13.7%. While portfolio committed occupancy fell q-o-q from 97.3% to 96.8% with Singapore occupancy down from 96.9% to 95.4%, strong leasing at Commodity Hub pushed committed occupancy from 86.0% as of 12 Apr to 92.7% by end-June.
  • Having secured 925k sf of leases YTD, leases expiring in the rest of the year should remain manageable at 3.1%. Management is actively managing commitments for 28.0% (of gross rental income) for expiring leases in FY19, being cognisant that rentals may recover from 2H18.
  • For the first time, Cache disclosed rental reversions, of -4.0% in 2Q18. This was a slight improvement from -4.8% YTD.

~ ~ Where SG investors share

Australian contributions rose to 23% of revenue

  • Its largest-to-date portfolio acquisition completed in 1Q18 helped boost Australia’s revenue contributions from 20% in 1Q to 23% in 2Q18. Aggregate leverage improved from 38.5% to 35.3% following its SGD73.8m Hi-Speed Logistics Centre divestment.
  • Cache walked away from CWT’s five ROFR assets which were acquired by Mapletree Logistics Trust (SGX:M44U; Rating: HOLD, Target Price SGD1.30). But it continues to eye overseas assets to increase portfolio yields, which may include further repositioning in Australia. We estimate SGD110m in debt headroom for potential acquisitions.

Swing Factors 


  • Earlier-than-expected pick-up in leasing demand driving improvement in occupancy. 
  • Better-than-anticipated rental reversion trend. 
  • Accretive acquisitions. 


  • Prolonged slowdown in economic activity could reduce demand for industrial space, resulting in lower occupancy and rental rates. 
  • Termination of long-term leases contributing to weaker portfolio tenant retention rate. 
  • Sharper-than-expected rise in interest rates could increase cost of debt and negatively impact earnings, with higher cost of capital lowering valuations. 

Chua Su Tye Maybank Kim Eng Research | 2018-07-31
SGX Stock Analyst Report BUY Maintain BUY 0.950 Same 0.950