Cache Logistics Trust - OCBC Investment 2018-08-01: Create A Cache Ahead Of The Curve

CACHE LOGISTICS TRUST SGX:K2LU

Cache Logistics Trust - Create A Cache Ahead Of The Curve

Cache Logistics Trust’s (CACHE) 2Q18 results were within expectations. Gross revenue increased 7.7% to S$30.0m while NPI dipped 0.1% y-o-y to S$21.6m. 2Q’s results include a quarter’s contribution from the nine Australian assets that were acquired earlier in February. 2Q distributable income fell 6.3% y-o-y – although NPI was essentially flat, this year’s 2Q was weighed down by the S$1.4m reserved for distribution to perpetual security holders.
DPU from operations and capital fell 17.6% y-o-y to 1.419 S cents or 23.3% of our initial full-year forecast, mainly due to the 13.7% larger unit base following last year’s rights issue.

~ SGinvestors.io ~ Where SG investors share

Notably, CWT Commodity Hub maintained a decent 92.7% occupancy after its master lease conversion. Recall that as at the 1Q18 results release, the asset had only achieved a committed occupancy of 86% beyond the expiry of the master lease with CWT.

Rental reversions for leases renewed during the quarter came in at -4.0% y-o-y. Going forward, we expect the challenging environment within the industrial space to continue for most of the rest of the year, before seeing daylight towards the end.
Management has also shared that they expect to see a bottoming of rents this year. Given that only 3.1% of Cache Logistics Trust’s portfolio by gross rental income is up for renewal for the rest of 2018 while 28.0% is up for renewal in 2019, we believe that Cache Logistics Trust is reasonably positioned for the industrial sector recovery.

We look forward to the industrial sector bottoming end-2018/early-2019 and believe that Cache Logistics Trust is ready to participate on the upturn.
As at 31 Jul’s close, we see an opportunity to collect Cache Logistics Trust units 2-3 quarters before clearer signs of operational improvement are seen.
With the rising interest rate environment, our cost of equity increases from 8.3% to 8.5%. After adjustments, our fair value falls slightly from S$0.83 to S$0.81. As at 31 Jul’s close, Cache Logistics Trust is trading at 7.8% FY18F yield. We upgrade Cache Logistics Trust from Hold to BUY.

Deborah Ong OCBC Investment Research | https://www.iocbc.com/ 2018-08-01

SGX Stock Analyst Report BUY Upgrade HOLD 0.81 Down 0.830