Cache Logistics Trust - OCBC Investment 2019-10-30: Weak Set Of Results


Cache Logistics Trust - Weak Set Of Results

  • Cache Logistics Trust’s 3Q19 results were below expectation.
  • Negative rental reversion of -11.9%.
  • Lower FY19 and FY20 DPU forecasts.

3Q19 DPU fell 11% Y-o-y

  • CACHE LOGISTICS TRUST (SGX:K2LU)’s 3Q19 gross revenue decreased 12% y-o-y to S$27.8m while NPI dropped 8.3% y-o-y to S$21.1m. However, on a q-o-q basis, revenue declined by 0.3% in 3Q19 while NPI increased by 3.3%, mainly due to the commencement of new leases and lower property expenses. See Cache Logistics Trust Announcements.
  • 3Q19 and 9M19 DPU dropped 11.0% y-o-y and 6% y-o-y to 1.313 S cents and 4.147 S cents respectively, which we consider below expectations as it came up to 23%/72% of our initial full-year forecast. See Cache Logistics Trust Dividend History. The drop in DPU was mainly due to lower NPI, dragged by lower revenue and higher expenses incurred from the conversion of Cache Gul LogisCentre from master lease to a multi-tenancy structure, transitory downtime between tenants at Commodity Hub, and the absence of contribution from the divested Jinshan Chemical Warehouse, as well as a weaker Australian dollar.

Lower Fair Value estimate of S$0.72

  • 3Q19 rental reversion was weak at -11.9%. For the YTD FY19, Cache Logistics Trust secured approximately 1.3 million square feet of leases, with approximately 609,000 square feet of leases secured in 3Q19 and only 1.1% of leases by NLA is due for expiry for the rest of FY19. As such, Cache Logistics Trust’s committed portfolio occupancy improved from 90% in 2Q19 to 94% in 3Q19. Of the entire portfolio, the committed occupancy in Singapore and Australia was at 92.8% (above JTC’s average of 89.3%) and 98.3% respectively.
  • As at 3Q19, Cache Logistics Trust’s gearing stands at 38.3 % with 70.1% of debt on fixed rate. In terms of debt maturity, 14% of total loan is due for expiry for the remaining of 2019 and 2020 and all these loans are dominated in AUD. Given the low rate environment in Australia with the Reserve Bank of Australia further cutting the cash rate by 25 bps to 0.75%, we believe that Cache Logistics Trust could benefit from better refinancing opportunities with lower rate.
  • Looking ahead, we are expecting a gradual improvement in occupancy for Cache Gul LogisCentre, but we expect the rental for logistics space in Singapore to remain soft given the economic headwinds and competitive environment. However, management noted that the supply expansion in logistics space is expected to moderate from the annual expansion average rate of 7.6% over the last 4 years to 1.5% from 2019 to 2023.
  • With an easing in new supply, vacancy is expected to stabilise. After adjustments to factor in the weak 3Q19 results, our FY19 and FY20 DPU forecasts decreases by 4.3% and 2.1% respectively, with lower fair value estimate of S$0.72 (previously S$0.725). See Cache Logistics Trust Share Price; Cache Logistics Trust Target Price.

Chu Peng OCBC Investment Research | 2019-10-30
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.720 DOWN 0.725