Cache Logistics Trust - DBS Research 2020-01-24: Steady As She Goes

CACHE LOGISTICS TRUST (SGX:K2LU)

Cache Logistics Trust - Steady As She Goes

Cache Logistics Trust's 4Q19 results in line with estimates.
Some occupancy volatility anticipated while rental reversions should be turning around in the coming year.
Partnership with LOGOS to watch.
Maintain HOLD call and Target Price of S$0.75.

We maintain our HOLD call on CACHE LOGISTICS TRUST (SGX:K2LU) given expectations of near-term volatility in cashflows given the on-going conversion of single-tenanted properties to multi-user properties. Our estimates are refreshed to account for latest estimates (occupancy and rental).
We maintain our Target Price of S$0.75.

Cache Logistics Trust's FY19 revenue and net property income (NPI) slid 6.6% and 5.6% to S$113.6m and S$85.8m respectively. The dip in performance was mainly due to
1. lower revenue from Commodity hub and Cache Gul LogisCentre (or Precise Two) due to conversions from master lease to multi-tenanted buildings (MTB);
2. lower signing rents vs. previous leases and the absence of rental contribution from 40 Alps Avenue and Jinshan Chemical Warehouse.
The acquisition of warehouse in Altona Victoria in Apr19 offset some of this decline in revenues.
Interest expenses increased by 16.8% y-o-y to S$21.5m mainly due to the lease liabilities (FRS 116) changes and stripping them out, finance cost would have remained stable at S$18.5m.
Given the lower performance, FY19 distributable income dipped by 5.7% to S$59.8m (4Q19 distributable income dipped 7.6% to S$14.9m), translating to a DPU of 5.523 Scts (4Q19 DPU of 1.376 Scts).

Cache Logistics Trust reported a S$57.3m dip in property valuations (S$54.2m in fair value adjustments, S$3.1m in ROU assets in relation to the land leases to JTC). The dip in valuations mainly came from its Singapore logistics properties, owing to its declining land tenures.
Cap rates for its Singapore properties remain stable at 6.3% while we saw a 0.2% dip in cap rates for its Australia assets.
Due to the dip in valuations, gearing increased to 40.1%.

Portfolio occupancy rates as of 31 Dec 2019 stood at 95.3% (SG at 94.2%, Australia at 99.6%). Cache Logistics Trust has a fairly long WALE of 3.0 years, with c.20.6% of its income expiring in 2020. In 4Q19, rental reversions stood at a positive 9.1% (for new leases secured) while YTD rental reversions stabilised to -0.3%.

The partnership with LOGOS, in our view, will bring forth more opportunities and collaborations between ARA and LOGOS. A platform with AUM, we believe that acquisition opportunities will be a key to Cache’s drive for inorganic growth in the future.
See Cache Logistics Trust Share Price; Cache Logistics Trust Target Price; Cache Logistics Trust Analyst Reports; Cache Logistics Trust Dividend History; Cache Logistics Trust Announcements; Cache Logistics Trust Latest News.

Derek TAN DBS Group Research | Singapore Research Team DBS Research | https://www.dbsvickers.com/ 2020-01-24

SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.750 SAME 0.750