Cache Logistics Trust

OCBC on 19 Apr

Cache Logistics Trust’s (CACHE) 1Q12 DPU of 2.086 S cents was in line with our expectations, forming 25.0% of our full-year estimate. As at 31 Mar, CACHE’s portfolio properties remained 100% occupied with a combination of triple-net master leases and multi-tenanted lease structures. Management reiterated that there will be no lease renewal in 2012. This provides a significant amount of earnings visibility and stability. Following the recent private placement, we note that CACHE’s aggregate leverage improved from 29.6% as at 31 Dec 2011 to 27.7%. This gives the REIT an estimated S$110m of additional debt headroom for future investment opportunities. Going forward, we believe CACHE will actively seek growth avenues to improve its DPU payout now that it is well capitalized. In the meantime, we understand that the acquisition of Pan Asia Logistics Centre at 21 Changi North Way is due to complete by end Apr. This is likely to provide marginal lift to its income. We make no changes to our forecasts as results were in line. Maintain BUY and S$1.11 fair value.

Stable set of 1Q12 results
Cache Logistics Trust (CACHE) released its 1Q12 results after market close yesterday. NPI grew 11.6% YoY (flat QoQ) to S$16.1m, while distributable income rose 7.6% (flat QoQ) to S$13.4m. The YoY performance was mainly driven by incremental rental income from upward rental adjustments and acquisitions over the past year. DPU for the quarter came in at 2.086 S cents and represented a 6.9% YoY increase. The results were in line with our expectations, with DPU forming 25.0% of our full-year estimate (24.8% of consensus).

Portfolio performance remains robust
As at 31 Mar, CACHE’s portfolio properties remained 100% occupied with a combination of triple-net master leases (with locked-in annual rental escalation of 1.5-2.0%) and multi-tenanted lease structures. The weighted average lease expiry (WALE) stood at 4.4 years, relatively unchanged from the WALE of 4.65 years seen in prior quarter. Management reiterated that there will be no lease renewal in 2012 (<2% of GFA due for renewal in 2013). This provides a significant amount of earnings visibility and stability.

Private placement improves financial position
With the recent issuance of 60m new units to raise ~S$57.1m in net proceeds via a private placement, we note that CACHE’s aggregate leverage improved from 29.6% as at 31 Dec 2011 to 27.7%. This gives the REIT an estimated S$110m of additional debt headroom for future investment opportunities. Average all-in financing cost increased marginally from 3.89% in 4Q11 to 3.94%, but interest cover was maintained at a strong 8.0x.

Maintain BUY
Going forward, we believe CACHE will actively seek growth avenues to improve its DPU payout now that it is well capitalized. In the meantime, we understand that the acquisition of Pan Asia Logistics Centre at 21 Changi North Way is due to complete by end Apr. The warehouse has an expected initial NPI yield of 7.7% and is likely to provide marginal lift to its income. We make no changes to our forecasts as results were in line. Maintain BUY and S$1.11 fair value.