Cache Logistics Trust (CACHE) has exercised the call option to acquire the newly completed ramp-up logistics warehouse known as Precise Two. In a separate announcement, CACHE also launched a private placement to raise gross proceeds of S$86.8m, of which ~66.0% of the gross proceeds is expected to be used to wholly fund the proposed acquisition of Precise Two. We have earlier anticipated CACHE to fund the acquisition fully by debt, since it has recently received its maiden credit rating from Moody’s (which allows it to exceed its previous debt ceiling of 35%). With this new development, we now adjust our estimates to factor in the placement and enlarged unit base. We also forecast a reduction in leverage as we believe CACHE may pare down its debts using the remaining proceeds to cushion a near-term dilution in DPU. Our fair value is revised to S$1.33 from S$1.34 previously. Maintain BUY.
Acquisition of ramp-up warehouse
Cache Logistics Trust (CACHE) has exercised the call option to acquire Precise Two from Precise Development Pte Ltd (PDPL) for S$55.2m. As a recap, Precise Two is a newly completed ramp-up logistics warehouse which is strategically located in the Jurong Industrial Precinct and has modern and attractive technical specifications. The transaction is a sale and leaseback to PDPL on a lease agreement for six years with an option to renew for another six years, and incorporates a locked-in rental escalation of 4.0% every two years. The property’s FY12 NPI is estimated to be ~S$4.8m, implying an initial NPI yield of 8.7%. Upon completion of the acquisition (expected in early Apr), CACHE’s portfolio size is expected to increase to over S$1.0b.
Private placement to raise S$86.8m
In a separate announcement, CACHE also launched a private placement of 70m new units to raise gross proceeds of S$86.8m. According to management, the placement saw strong participation from new and existing institutional investors. The issue price has been fixed at S$1.24 per unit, which is at the low end of the indicative price range of S$1.24-S$1.265. We view the placement as opportunistic as the issue price represents a considerable 29.2% premium to its NAV and only a 5.3% discount to the last transacted price prior to the announcement. CACHE intends to use ~66.0% (S$57.3m) of the gross proceeds to wholly fund the proposed acquisition of Precise Two, another 31.0% (S$26.9m) to fund potential acquisitions or pare down debt, and the balance for estimated fees/working capital purposes.
Maintain BUY
We have earlier anticipated CACHE to fund the acquisition fully by debt, since it has recently received its maiden credit rating from Moody’s (which allows it to exceed its previous debt ceiling of 35%). With this new development, we now adjust our estimates to factor in the placement and enlarged unit base. We also forecast a reduction in leverage as we believe CACHE may pare down its debts using the remaining proceeds to cushion a near-term dilution in DPU. Our fair value is revised slightly down to S$1.33 from S$1.34 previously. Maintain BUY.
Private placement to raise S$86.8m
In a separate announcement, CACHE also launched a private placement of 70m new units to raise gross proceeds of S$86.8m. According to management, the placement saw strong participation from new and existing institutional investors. The issue price has been fixed at S$1.24 per unit, which is at the low end of the indicative price range of S$1.24-S$1.265. We view the placement as opportunistic as the issue price represents a considerable 29.2% premium to its NAV and only a 5.3% discount to the last transacted price prior to the announcement. CACHE intends to use ~66.0% (S$57.3m) of the gross proceeds to wholly fund the proposed acquisition of Precise Two, another 31.0% (S$26.9m) to fund potential acquisitions or pare down debt, and the balance for estimated fees/working capital purposes.
Maintain BUY
We have earlier anticipated CACHE to fund the acquisition fully by debt, since it has recently received its maiden credit rating from Moody’s (which allows it to exceed its previous debt ceiling of 35%). With this new development, we now adjust our estimates to factor in the placement and enlarged unit base. We also forecast a reduction in leverage as we believe CACHE may pare down its debts using the remaining proceeds to cushion a near-term dilution in DPU. Our fair value is revised slightly down to S$1.33 from S$1.34 previously. Maintain BUY.
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