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


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.

HOLD and Target Price maintained at S$0.75 after lowering risk-free rate assumptions.

  • 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.

Operational results in line with estimates.

  • 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).

Asset value decline; gearing up to 40.1%.

  • 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%.

Operations have stabilised.

  • 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%.

LOGOS partnership to bear fruit.

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