Cache Logistics Trust - Maybank Kim Eng 2019-04-25: Undervalued Logistics Play

CACHE LOGISTICS TRUST (SGX:K2LU)

Cache Logistics Trust - Undervalued Logistics Play

CACHE LOGISTICS TRUST (SGX:K2LU)'s 1Q19 DPU of SGD1.51cts was up 0.4% y-o-y and in line with our estimates but ahead of the street. We have kept our estimates and DDM-based Target Price unchanged at SGD0.88 (COE: 8.2%, LTG: 1.5%).
Fundamentals remain sound on 94.8% portfolio occupancy and rising Australian contributions. Looking ahead, we see NPIs recovering as Singapore rents stabilise and leasing demand picks up.

Valuations are compelling at 8.5% dividend yields and 0.9x P/BV, both at -1SD of their 8-year averages. AUM has been cleaned up with the divestment of its single China asset, with growth supported by its Australian expansion.
BUY.

Cache Logistics Trust's 1Q19 revenue and NPI rose 6.2% y-o-y and 4.0% y-o-y on higher contribution from its 9-property Australian portfolio deal completed in Feb 2018, and conversion of CWT Commodity Hub from master lease to multi-tenancies. Its Singapore revenue rose 2.7% y-o-y, and committed occupancies were stable at 92.2% (from 92.5% at end-Dec 2018).
We see limited DPU impact from CWT’s loan default, with its exposure to CWT at 16.5% of gross rental income (down from 20.6% at end-Dec 018), and WALE at less than a year, against a 3.1 year portfolio WALE. Management could look to negotiate directly with end-users on the CWT’s leased space.

Revenue from Australia jumped 25.3% y-o-y with its largest-to-date portfolio acquisition completed in 1Q18. Cache Logistics Trust has followed up with a AUD41.2m deal (182-198 Maidstone Street in Altona, Victoria) at 6.8% NPI yield, which is expected to complete at end-Apr 2019. We estimate this adds 1.0-1.5% to FY19-21 DPUs.
Aggregate leverage rose from 36.2% to 37.4%, leaving ~SGD200m in debt headroom. Management continues to eye assets in Australia and New Zealand for their freehold land.

Cache Logistics Trust has achieved a positive resolution with Singapore’s IRAS on 51 Alps Ave – SGD7.4m tax transparency for its rental between Sep 2016 to end-Mar 2019, with SGD2.9m (or SGD0.27cts) to top up its 2Q19 distributions.

Chua Su Tye Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2019-04-25

SGX Stock Analyst Report BUY MAINTAIN BUY 0.880 SAME 0.880