• Results within expectation
• 7.3% FY18F yield as at 25 Apr close
• FV drops slightly to S$0.83

Revenue Up 7.3% on Aussie Acquisition

Cache Logistics Trust’s (CACHE) 1Q18 results were within expectation. 1Q18 revenue increased 7.3% YoY to S$29.0m – or 23.8% of our initial full-year forecast – mainly due to the acquisition of nine warehouses in Australia which was completed on 15 Feb 2018. Correspondingly, 1Q18 distributable income from operations increased 5.5% YoY to S$16.1m or 23.6% of our initial full-year forecast.

There is no distributable income from capital this quarter vs. the S$0.9m distributed in 1Q17. Mainly due to the rights issue, 1Q18 total DPU fell 12.5% YoY to 1.507 S cents or 23.7% of our initial full-year forecast. DPU from operations fell 7.2% YoY. Gearing now stands at 38.5%, but will be reduced to 35.2% after the repayment of debt from the sale proceeds of 40 Alps Avenue.

Conversion to Multi-tenanted Leases at CWT Commodity Hub

We expect the challenging environment within the industrial space to continue for at least the rest of the year. However, only 6.7% of CACHE’s leases by gross rental income are up for renewal for the remainder of this year. Going forward, we focus more on the additional contribution from the Australian acquisition as well as the conversion of CWT Commodity Hub from master lease to a multi-tenancy lease on 12 Apr 2018.

So far, the asset has achieved a committed occupancy of 86% beyond the expiry of the master lease with CWT. CWT itself continues to lease around 61% of the premises. We are slightly concerned with the remaining 14% in uncommitted occupancy at the asset and expect any new leases to be signed at lower rental rates.

Positive on the Portfolio Rebalancing

After slight adjustments, our fair value decreases from S$0.85 to S$0.83. We continue to be positive on the Australia acquisition given the longer WALE and a higher proportion of freehold assets. Australia’s proportion in CACHE’s portfolio now stands at 28%. Nonetheless, unit prices as of 25 Apr do not look particularly attractive.

As at 25 Apr’s closing price of S$0.83, CACHE is trading at a 7.3% FY18F yield. With the NAV per unit at S$0.705 as at 1Q18, CACHE is trading at around 1.18x P/B. Maintain HOLD

Source: OCBC Research - 26 Apr 2018