Cache Logistics Trust (CACHE) reported an inline set of FY17 results. FY17 NPI dipped 0.8% YoY to S$87.3m. FY17 DPU from operations and capital fell 10.9% YoY to 6.583 S cents, while FY17 DPU from operations alone fell 10.0% to 6.418 S cents or 95% of our forecast. 4 ppt of this gap was due to the timing of the Schenker lump-sum pay-outs. Besides this, we consider the results largely within expectations.

Excluding the impact of the rights issue, FY17 DPU (total) would have fallen 6.2% to 7.247 S cents. Along with the results, CACHE also announced the proposed divestment of Hi-Speed Logistics Centre as part of its rebalancing strategy.

In this vein, we are positive on CACHE's lowered gearing of 36.3% post the rights issue, as it offers CACHE financial flexibility for future acquisitions. Nonetheless, we expect rental reversions to remain negative and volatile through 2018, with some stabilization towards the end of this year.

As we update our model parameters, we place our Hold rating and fair value of S$0.81 under review.

Source: OCBC Research - 19 Jan 2018