Cache Logistics Trust

Kim Eng on 22 Jan 2013

4Q & FY12 results inline. FY12 revenue at SGD72.6m (+12%) , was 102% of ours and 101% of consensus estimate. 4QFY12 revenue at SGD19.1m (flat QoQ, +13% YoY), was 27% of ours and consensus estimate. FY12 DPU at 8.365 SG-cts (+1.6% YoY) was 101% of ours and consensus estimates. 4QFY12 DPU at 2.154 SG-cts (flat QoQ, +2.5% YoY) was 26% of ours and consensus estimates.

Portfolio review. Portfolio occupancy remains stable at 100% with a weighted average lease expiry of 3.9 years (4.1 yrs prev. qtr). CACHE retains its pole position in the ramp-up logistics warehouses space with ~23% market share in Singapore. Management maintains that it will continue to seek accretive acquisitions in Singapore, China and Malaysia.

Capital Management. Aggregate leverage inched down to 31.7% from 32.6% last quarter due to revaluation gains (+SGD26m, c3% of investment properties). CACHE refinanced its debt in Jun 2012, which resulted in a lower financing cost. All-in-financing costs for 4Q12 averaged 3.5%, compared to 3.9% in 4Q11, with SGD187.5m and SGD125.5m due only in 2015 and 2016 respectively. Half of CACHE’s properties are unencumbered, against which it can raise further financing, should the need arise.

Looks fairly valued. From our estimates, the implied cap rate for CACHE (based on 4Q12 results) is 6.1%. The counter is presently trading at 6.6% FY12 DPU yield. which provides not much leeway for further yield compression, in our view. CACHE’s predominantly triple-net master leases, long WALE and secured revenue streams provide a high degree of predictability in cash flow and stability in earnings. But we remain wary of its inherent concentration risks on (1) a single asset – CWT Commodity Hub (38% of FY13 GAV) and (2) its main master lessee (CWT/C&P). According to our estimates, CWT/C&P and its associated companies accounts for almost 90% of CACHE’s FY12 gross rental income. Pending further acquisitions and asset enhancement initiatives, we see limited near-term upside for now. Reiterate HOLD with a TP of SGD 1.27.