The ex-rights trading for Cache Logistics Trust’s (CACHE) rights issue began last Fri and our exrights fair value estimate is S$0.78. Our fair value in turn implies an intrinsic value of S$0.148 for the rights entitlements, given the rights issue price of S$0.632 per unit. The commencement of trading of rights entitlements is scheduled to be 9am on 15 Sept, Fri.

As mentioned earlier, we are positive on the significant decrease in leverage though we believe that valuations for CACHE are not compelling now. Against yesterday’s closing price, CACHE is trading at a FY17F dividend yield of 8.1% and a FY18F yield of 7.7%.

In terms of CACHE’s operational outlook, we remain concerned about the challenging industry conditions. While CACHE has minimal renewal risk for the 2H17, ~21% of leases by gross rental income is up for renewal in 2018. CACHE’s debt headroom of S$218.1m, however, does open up possibilities for yieldaccretive acquisitions.

We maintain our HOLD rating on CACHE with an ex-rights fair value of S$0.78.

Source: OCBC Research - 12 Sept 2017