WITH its properties rented out under a master lessee (except APC Distrihub, which has two key tenants), Cache is able to enjoy a stable 100 per cent occupancy rate with a long-term weighted average lease to expiry profile of 3.7 years.
Coupled with a low portfolio lease expiry profile of 0 per cent and 6 per cent forecast for FY2013 and FY2014 respectively (despite some 27.4 million sq ft and 20.1 million sq ft in industrial space coming online in 2013 and 2014 respectively), we expect the Reit to be able to deliver stable yet sustainable income to investors over the next few years.
Cache reported a Q2 FY2013 dividend per unit (DPU) of 2.15 cents (+8.4 per cent y-o-y). Revenue for this period grew to $20.4 million (+16.5 per cent y-o-y) while net property income rose by 17.0 per cent y-o-y, mainly attributed to additional contribution from a full quarter's rental income from the Reit's Pandan Logistics Hub (acquired in July 2012) and the recent acquisition of Precise Two in April.
In the subsequent quarters, we expect to see decent growth from Cache as the latter property will continue to contribute to its earnings growth.
We believe that Cache will be able to achieve stable and long-term growth, thereby benefiting its unitholders, given: i) the high occupancy rate and the superior profile of its assets, ii) strong support from its sponsor, and iii) no debts due for renewal until 2015 and 70 per cent of total debt tied to a fixed rate.
Currently trading at 6.8 per cent and 7.2 per cent of FY2013 and FY2014 forecast dividend yields respectively, Cache is one of Singapore's highest-yielding Reits.
We initiate coverage on the Reit with a "buy" and a dividend discount model-based (cost of equity: 9.1 per cent, terminal growth: 2.0 per cent) target price of $1.42.
BUY
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