Cache Logistics Trust - OCBC Investment 2020-01-28: Improvement In Rental Reversions


Cache Logistics Trust - Improvement In Rental Reversions

  • Cache Logistics Trust's FY19 DPU fell 6.6% y-o-y.
  • Potential venture into APAC.
  • Higher Fair Value estimate of S$0.74.

4QFY19 results met expectations

  • CACHE LOGISTICS TRUST (SGX:K2LU)’s 4Q19 gross revenue dropped 12.2% y-o-y to S$27.2m while NPI dropped 12.4% y-o-y to S$20.5m. The drop in revenue was mainly due to
    1. transitory vacancy downtime between tenants at Commodity Hub;
    2. lower signing rents for leases as compared to the previous leases;
    3. conversion of Cache Gul LogisCentre from master lease to a multi-tenancy structure,
    4. the absence of contribution from the divested Jinshan Chemical Warehouse; as well as
    5. a weaker Australian dollar.
  • Lower gross revenue was partially offset by additional rental contribution from the Altona, Australia which was acquired in Apr 2019.
  • 4Q19 and FY19 DPU declined 8.4% y-o-y and 6.6% y-o-y to 1.376 S cents and 5.523 S cents respectively, which we consider to be in-line with our expectations as it came up to 25%/101% of our full-year forecast. See Cache Logistics Trust Dividend History.
  • See Cache Logistics Trust Announcements; Cache Logistics Trust Latest News.

FY19 rental reversion stabilised to -0.3%

  • As at 31 Dec 2019, Cache Logistics Trust’s committed portfolio occupancy stood at 95.3%. Of the entire portfolio, the committed occupancy in Singapore and Australia was at 94.2% (above JTC’s average of 89.3%) and 99.6% respectively.
  • Rental reversion in 4QFY19 was strong at 9.1%, thanks to the 202,100 square feet of new leases secured in 4Q. Full year rental reversion, however, was muted at -0.3%. For FY20, we expect industrial rents to remain soft in Singapore amid economic headwinds.

Strategic partnership with LOGO

  • On 12 Dec 2019, ARA announced a venture with LOGOS to establish a best-in-class logistics real estate development and investment management partnership in the Asia Pacific region (APAC). As part of the transaction, ARA will transfer its entire holdings in both Cache Logistics Trust and the Manager to LOGOS. The transaction is expected to complete in 1Q 2020. Upon completion, ARA will retain control of the Manager through LOGOS.
  • LOGO is a leading owner, developer and manager of logistic properties with operations across APAC. We believe Cache Logistics Trust’s strategic partnership with LOGO could bring more acquisition opportunities in the future.
  • Rolling forward our estimates, our fair values estimate increases slightly from S$0.72 to S$0.74.
  • See Cache Logistics Trust Share Price; Cache Logistics Trust Target Price; Cache Logistics Trust Analyst Reports.

Chu Peng OCBC Investment Research | 2020-01-28
SGX Stock Analyst Report HOLD MAINTAIN HOLD 0.74 UP 0.720