Cache Logistics Trust - OCBC Investment 2019-04-26: Look Forward To A 2Q Present


Cache Logistics Trust - Look Forward To A 2Q Present

  • Expect S$2.9m capital distribution for 2Q19.
  • Positive rental reversion of +1.3%.
  • Fair value at S$0.74.

Cache Logistics Trust's 1Q19 DPU up 0.4% y-o-y

  • CACHE LOGISTICS TRUST (SGX:K2LU)’s 1Q19 gross revenue grew 6.2% y-o-y to S$30.8m while NPI grew 4.0% y-o-y to S$23.8m, mainly due to the contributions from the nine Australian assets acquired in Feb 2018, as well as the conversion of CWT Commodity Hub from master lease to multi-tenanted.
  • Distributable amount to unitholders increased 1.2% y-o-y to S$16.3m. DPU grew 0.4% y-o-y to 1.513 S cents or 27.5% of our initial full-year forecast, which we consider above expectations.
  • Notably, a positive rental reversion of +1.3% was recorded in 1Q19, which we take to be a sign of better demand-supply balance.

Proposed acquisition of Aussie property

  • On 20 March, Cache Logistics Trust announced the proposed acquisition of a freehold warehouse in Victoria, Australia for ~S$39.7m. The acquisition will be funded using net sales proceeds from the Jinshan divestment as well as debt. The asset is expected to generate a first-year NPI yield of ~6.8%, and there is a 3.25% yearly rental escalation within the current lease (WALE of 2.5 years).
  • In terms of accretion, FY18 DPU would increase 0.5% from 5.903 S cents (FY18 actual) to 5.933 S cents (FY18 pro forma), while NAV would remain the same at S$0.662. While the DPU accretion is minimal, we are positive on the acquisition as it increases the average land tenure of the portfolio.

Expect a special capital distribution in 2Q19

  • Separately, we note that the REIT manager has announced that S$7.4m out of S$8.2m received as part of the resolution of 51 Alps Avenue has qualified for tax transparency. The REIT manager estimates that ~S$2.9m of the S$7.4m will be distributed along with 2Q19 distributions – though this is an estimate and is subject to adjustments. We have factored this into our FY19F dividend forecast.
  • As at 25 Apr’s close, Cache Logistics Trust is trading at an 8.5% FY19F dividend yield. After adjustments and a lower risk-free rate of 2.3% (2.7% previously), our fair value increases from S$0.70 to S$0.74.
  • We maintain HOLD on Cache Logistics Trust.

Deborah Ong OCBC Investment Research | 2019-04-26
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.74 UP 0.700