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

Cache Logistics Trust - OCBC Investment Research 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 

  • All waiting for 2019 sector upturn… 
  • Start accumulating shares before others 
  • BUY rated as at 31 Jul close 

2Q18 results within expectations 

  • 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. 

~ ~ Where SG investors share

Progress made at CWT Commodity Hub 

  • 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. 

Only 3.1% of portfolio expiring in 2H18 

  • 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. 

Look forward to 2019, start accumulating before others 

  • 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 | 2018-08-01
SGX Stock Analyst Report BUY Upgrade HOLD 0.81 Down 0.830