• 1Q14 DPU at 2.14 S cents
• Renewed one master lease
• Clinched first BTS development

Sturdy results consistent with expectations

Cache Logistics Trust (CACHE) turned in a firm set of 1Q14 results last evening. NPI climbed 8.2% YoY to S$19.6m, whereas distributable income rose 5.5% to S$16.7m. The positive performance was mainly attributable to contribution from acquisition of Precise Two in Apr 2013 and stepped-up rents within the portfolio. DPU for the quarter stood at 2.14 S cents, representing a YoY decline of 4.2%. However, this is expected as the unit base has risen by 10.5% due to the private placement in Mar 2013. 1Q14 DPU, we note, constitutes 24.6% of both ours and consensus full-year distribution forecasts.

Continued focus on lease and capital management

CACHE’s portfolio continued to exhibit strength, with occupancy holding steady at 100% and weighted average lease to expiry healthy at 2.9 years (3.1 years in 4Q13). Further to management guidance in last quarter that it was negotiating with relevant parties for lease renewals, CACHE announced that it has renewed its master lease at Kim Heng warehouse for another two years (only 2% of portfolio GFA left for renewal in 2014). Looking ahead, CACHE will continue to focus its efforts on addressing its lease expiries (34% of GFA expiring in 2015) and refinancing needs (59.9% of total debt expiring in 2015) for the next two years. We view this move positively given that the impending supply of warehouse space is relatively substantial and that the interest costs look set to trend upwards.

BTS development to enhance portfolio profile

As announced last week, CACHE has also secured an agreement with DHL Supply Chain to develop and lease a build-to-suit (BTS) ramp-up warehouse located at Tampines LogisPark. This marks CACHE’s foray into BTS development through collaboration with its sponsor CWT Limited. In our view, the contract will not only provide CACHE with quality recurring income, enhance its lease expiry profile, but also strengthen its market position in modern ramp-up warehouse in Singapore. Aggregate leverage is guided to increase from current 29.1% to 34.8% upon completion in 2H15, still within healthy levels. We maintain BUY with unchanged fair value of S$1.25 on CACHE.

Source: OCBC Research - 24 Apr 2014