• 4Q16 DPU slumped 10.8% YoY
• Gearing increased to 43.1%
• Uncertainty remains over 51 Alps Ave

4Q16 results within our expectations

Cache Logistics Trust (CACHE) reported its 4Q16 results which came in within our expectations. Gross revenue jumped 13.5% YoY to S$27.3m due to incremental rental contribution from DHL Supply Chain Advanced Regional Centre and its Australian properties, but partially offset by lower revenue from 51 Alps Ave. DPU slumped 10.8% YoY to 1.85 S cents. This was due to a larger unit base and smaller capital distribution of S$756k in 4Q16 which arose from the sales proceeds of an asset disposal, versus S$2.1m in 4Q15.

Excluding the distributions from capital, CACHE’s adjusted DPU would have declined by a smaller pace of 3.9%. For FY16, CACHE’s gross revenue spiked 24.0% YoY to S$111.3m and constituted 101.9% of our full-year forecast. DPU of 7.725 S cents represented a dip of 9.1% and made up 101.7% of our FY16 projection. Excluding capital distributions, CACHE’s adjusted FY16 DPU would have fallen 5.4%.

Aggregate leverage increased to 43.1%

Due to revaluation losses of S$80.7m for CACHE’s investment properties, its aggregate leverage increased from 39.8% (as at end-FY15) and 41.2% (as at end-3Q16) to 43.1%, which is slightly below the regulatory limit of 45%. With regards to its 51 Alps Ave property, CACHE highlighted that legal proceedings are still continuing and further updates would be provided when material developments arise.

Maintain HOLD

Separately, CACHE announced that it has completed the divestment of its Changi Districentre 3 (CDC 3) property to Agility International Logistics Pte Ltd for a sale price of S$25.5m. CDC 3 is a multi-tenanted, two-storey ramp-up warehouse with a GFA of ~177,000 sq ft and remaining land lease of ~17 years and is located within the Changi International LogisPark (North).

We factor this transaction and CACHE’s latest results in our model, and also raise our cost of equity assumption from 9.3% to 9.8% as we adopt a higher risk-free rate and beta input to account for a steeper yield curve environment and CACHE’s increased aggregate leverage. Rolling forward our valuations, we derive a lower fair value estimate of S$0.78 (previously S$0.85). Maintain HOLD.

Source: OCBC Research - 24 Jan 2017