Cache Logistics Trust (CACHE) 3Q17 results were in line with expectations. Revenue fell 2.2% YoY, due to the divestment of Cache Changi Districentre 3 and lower income from 51 Alps Avenue which was partially offset by higher contributions from DHL Supply Chain Advanced Regional Centre, Cache Cold Centre and the Australia portfolio. Similarly, NPI fell 3.3% YoY to S$21.3m.

3Q17 DPU from operations and capital fell 12.8% YoY to 1.541 S cents or 23.0% of our full-year forecast, mainly due to the enlarged unit base after recent rights issue. The sum of 3Q17 DPU post-rights and 1H17 DPU (unadjusted for bonus element) make up ~76.6% of our full-year forecast. The management continues to expect that the 51 Alps issue to be resolved by year-end.

We are positive on the recently reduced gearing (35.7% as of end-3Q17) but believe unit prices could be more compelling given that the REIT still faces challenges ahead. Against yesterday’s closing price of S$0.84, CACHE is trading at around ~7.6% FY18F yield.

We maintain HOLD on CACHE but place our fair value of S$0.78 under review as we fine-tune our assumptions.

Source: OCBC Research - 25 Oct 2017