3Q12 results inline. 3Q12 revenue at SGD19.1m (+9% QoQ, +14% YoY), was 27% of ours and consensus estimate. The higher revenue was attributable to the additional rental income from upward rental adjustments and new acquisitions. 9M12 revenue at SGD53.5m (+12% YoY), was 75% of ours and consensus estimate. 3Q12 DPU at 2.144 SG-cts (+8% QoQ, +2% YoY) was 27% of ours and consensus estimates. 9M12 DPU at 6.21 SG-cts (+1% YoY) was 77% of ours and 74% of consensus estimates.

Portfolio review. Portfolio occupancy remains stable at 100% with a weighted average lease expiry of 4.1 years (4.4 yrs prev. qtr). With the acquisition of Pandan Logistics Hub in July, CACHE now has ~23% market share of ramp-up logistics warehouses in Singapore.

Capital Management. Aggregate leverage inched up to 32.6% from 27.5% last quarter, following a capital management exercise in 2Q12 to refinance the existing loan portfolio and fund the acquisition of Pandan Logistics Hub. Half of CACHE’s properties are unencumbered, against which it can raise further financing, should the need arise. 3Q12 all-in financing cost averaged 3.6% with 60% of borrowings expiring in FY15 and the remaining in FY16.

Looks fairly valued. From our estimates, the implied cap rate for CACHE (based on 3Q12 results) is 6.2%. The counter is presently trading at 6.8% FY12 DPU yield, which provides some 60 bps 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 FY12 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. With further acquisitions unlikely given the run-up in capital values, we see limited growth prospects moving forward. Reiterate HOLD with a TP of SGD 1.24.

Source: Maybank Kim Eng Research - 25 Oct 2012