Cache Logistics Trust

Kim Eng on 30 Mar 2012

Background: Cache Logistics Trust (CLT) is the fourth-largest industrial REIT in Singapore and a niche logistics player. Its portfolio of ramp-up warehouses is mainly on master leases to either its sponsor CWT Ltd or CWT’s privately-held parent, C&P Holdings. CLT offers a competitive distribution per unit yield of 8.4% based on consensus estimates, and its balance sheet is relatively stronger than its peers.

Recent development: In a private placement concluded on 22 March 2012, 60m new shares were placed at $0.985 per share (only a 5% discount to its VWAP). The private placement was about 1.24x subscribed and saw strong participation from Asian and European investors with the majority of demand from Asia.

Proactive capital management. The private placement raised net proceeds of $57.1m, of which $36m would be used to finance the proposed acquisition of 21 Changi North Way, a warehouse facility and $20.5m to partially repay existing debt. CLT’s gearing is expected to decrease from 29.6% as at December last year to 26.1% after the deployment of the proceeds. With the purchase of 21 Changi North Way, CLT will have 11 assets under management – 10 in Singapore and one in Shanghai.

Positioned for growth. CLT is the capital recycling platform for CWT and C&P. Based on our estimates, the warehouse properties that CWT owns in Singapore and overseas are worth about $439m. Assuming a target gearing ratio of 40%, CLT has debt headroom of about $170m for more acquisitions. The existing properties under the right of first refusal (ROFR) granted to CLT involve 13 properties in Singapore and China. With a combined GFA of 2.8m sq ft, they form a sizeable pipeline for acquisition. In addition, CLT is mulling third‐party acquisitions in the Asia Pacific.