• Expect S$2.9m capital dist. for 2Q
• Positive rental reversion of +1.3%
• Fair value at S$0.74

DPU Up 0.4% YoY

Cache Logistics Trust’s (CACHE) 1Q19 gross revenue grew 6.2% YoY to S$30.8m while NPI grew 4.0% YoY to S$23.8m, mainly due to the contributions from the nine Australian assets acquired in Feb 2018, as well as the conversion of CWT Commodity Hub from master lease to multi-tenanted.

Distributable amount to unitholders increased 1.2% YoY to S$16.3m. DPU grew 0.4% YoY to 1.513 S cents or 27.5% of our initial full-year forecast, which we consider above expectations. Notably, a positive rental reversion of +1.3% was recorded in 1Q19, which we take to be a sign of better demand-supply balance.

Proposed Acquisition of Aussie Property

On 20 March, CACHE announced the proposed acquisition of a freehold warehouse in Victoria, Australia for ~S$39.7m. The acquisition will be funded using net sales proceeds from the Jinshan divestment as well as debt. The asset is expected to generate a first-year NPI yield of ~6.8%, and there is a 3.25% yearly rental escalation within the current lease (WALE of 2.5 years).

In terms of accretion, FY18 DPU would increase 0.5% from 5.903 S cents (FY18 actual) to 5.933 S cents (FY18 pro forma), while NAV would remain the same at S$0.662. While the DPU accretion is minimal, we are positive on the acquisition as it increases the average land tenure of the portfolio.

Expect a Special Capital Distribution in 2Q19

Separately, we note that the REIT manager has announced that S$7.4m out of S$8.2m received as part of the resolution of 51 Alps Avenue has qualified for tax transparency. The REIT manager estimates that ~S$2.9m of the S$7.4m will be distributed along with 2Q19 distributions though this is an estimate and is subject to adjustments.

We have factored this into our FY19F dividend forecast. As at 25 Apr’s close, CACHE is trading at an 8.5% FY19F dividend yield. After adjustments and a lower risk-free rate of 2.3% (2.7% previously), our fair value increases from S$0.70 to S$0.74. We maintain HOLD on CACHE.

Source: OCBC Research - 26 Apr 2019