• FY13 DPU increased 3.3%
• Portfolio metrics remained robust
• Continued focus on growth

4Q13 results within expectations

Cache Logistics Trust (CACHE) announced its 4Q13 results last evening. Gross revenue rose by 8.2% YoY to S$20.7m, while NPI saw an increase of 7.1% to S$19.6m. The growth was due to contribution from acquisition of Precise Two and built-in rental escalation within the portfolio. Distributable income, on the other hand, registered a stronger 9.6% growth to S$16.6m on lower financing costs. However, DPU eased marginally by 0.8% to 2.137 S cents as a result of an enlarged unit base. Nonetheless, FY13 DPU still raked up a 3.3% growth to 8.644 S cents. This is in line with both our and consensus full-year DPU forecasts of 8.59 S cents and 8.7 S cents respectively.

Maintaining its strong form

CACHE continued to maintain a 100% occupancy rate for its portfolio and healthy weighted average lease to expiry of 3.1 years (3.4 years in 3Q). For 2014, only 3% of its GFA are due for renewal, thus giving CACHE strong earnings stability. Management also revealed that CACHE is currently in advanced negotiations with its Sponsor and end-users for the lease renewals coming in 2015 (34% of portfolio GFA), which we view positively in light of the upcoming supply of warehouse space. In the area of capital management, we understand that CACHE is still discussing with banks on the refinancing of its maturing debts in 2015. Aggregate leverage stood at 29.2%, unchanged from that seen in 3Q, while all-in financing costs improved to 3.48% in FY13 from 3.82% in FY12. In addition, 70% of CACHE’s interest exposure is hedged, thereby reducing the uncertainty over its funding costs.

Maintain BUY

On the acquisition front, CACHE shared that Singapore, China and Malaysia continue to be its key markets, but did not shed any details on the timeline or specific assets. Management also reiterated that it will seek redevelopment opportunities and built-to-suit projects. We are keeping our forecasts largely intact pending any development.

However, in view of impending Fed tapering, we reduce our fair value to S$1.20 from S$1.30 to reflect higher equity risk premium and risk free rate. But maintain BUY as upside remains compelling.

Source: OCBC Research - 22 Jan 2014