CACHE LOGISTICS TRUST (SGX:K2LU)
Cache Logistics Trust - Looking For A Better 3Q
- Cache Logistics Trust's 2Q DPU of 1.321 Scts was below at 22% of our estimate. 1H DPU of 2.834 Scts fell short at 46% of our and consensus FY19F on weak occupancies.
- Post 2Q19, Cache Logistics Trust secured commitments for 308,000 sq ft of space that raised committed occupancy to 92.6%.
- We maintain our Hold call with a lower Target Price of S$0.76.
CACHE's 2Q19 results below expectations at 22% of our/consensus forecasts
- CACHE LOGISTICS TRUST (SGX:K2LU)'s 2Q19 DPU of 1.321 Scts (-6.9% y-o-y, -12.7% q-o-q) was below expectations at 22% of our/consensus FY19 DPU forecasts. This was due to weak occupancies at Commodity Hub and the conversion of Precise Two from a single tenant to a multi-tenanted building.
- NPI margin improved y-o-y due to the adoption of FRS 116 where S$1.5m of land rent was excluded from property expenses.
- Cache Logistics Trust's 1H19 DPU of 2.834 Scts (-3.1% y-o-y) was also below our/expectations at 46% of FY19 DPU forecasts.
Occupancy took a hit but could see improvements soon
- Portfolio committed occupancy declined from 94.8% to a further 308,000 sq ft of space, representing more than half the remaining expiring leases in FY19, after the quarter ended. This raises committed occupancy to 92.6%.
- Rental reversion during 2Q19 was Australia which was previously under-rented.
Capital structure still
- Gearing and natural time decay.
- Upcoming debt maturities in FY19 and FY20 comprise A$-denominated loans and we do not rule out a lower cost of debt due to the declining cash rates in Australia.
Maintain Hold with a lower Target Price of S$0.76
- We adjust our FY19-21F DPU forecasts to account for the master lease conversion and transitory vacancies. We also period until Aug 2021. Our DDM-based Target Price is lowered to S$0.76 as a result.
- Upside risks to our call include a faster recovery of the logistics market and accretive acquisitions. Cache Logistics Trust previously mentioned South Korea as a possible market for expansion given its sponsor’s presence there. We think that a meaningful entry into this new market could be a portfolio deal rather than a single-asset acquisition.
- Further downside risks would be large tenant non-renewals and slower backfilling of vacant space. On this front, CWT remains current with its rents and Cache Logistics Trust maintains security deposits on this account.
LOCK Mun Yee
CGS-CIMB Research
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Ervin SEOW
CGS-CIMB Research
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https://research.itradecimb.com/
2019-07-25
SGX Stock
Analyst Report
0.76
DOWN
0.780
