Cache Logistics Trust

DBS Vickers, Oct 24

CACHE Logistics Trust (Cache)'s Q3-13 topline and net property income grew by 8 per cent and 4 per cent y-o-y to S$20.7 million and S$19.6 million, respectively. This was due to contribution from an expanded portfolio from Precise Two warehouse, and supported by increased rental income from annual step-ups.

Interest cost was 4 per cent lower y-o-y to S$2.7 million after refinancing of its loans at an all-in rate of 3.45 per cent. As a result, distributable income came in 10 per cent higher y-o-y at S$16.5 million.

However, DPU was marginally lower by 0.8 per cent y-o-y at 2.126 Scts due to an expanded share base due to the placement exercise in Q1-13.

With minimal renewals in FY14F, Cache offers strong income visibility. A majority of its income will only be expiring in FY15/16F; these are mainly the master-leased IPO properties, of which the Manager is actively engaging with the master lessee (CWT and C&P Limited) for the renewal of this lease.

Growth is likely to be driven by acquisitions. With a conservative gearing ratio of 29.2 per cent (below management's long-term optimal level of 35-40 per cent) and a visible pipeline from sponsors CWT/C&P, we believe that acquisitions will likely feature, albeit at a more moderate rate than before.

Yields of close to 7.3 per cent are one of the highest amongst peers. Maintain "buy" and S$1.33 TP for a total return of 17 per cent. Risk to our forecast is slower than anticipated rate of acquisitions which will mean that DPU is likely to dip given the expanded share base.

BUY