2Q18 in Line; BUY

• Cache Logistics Trust's 2Q18 DPU of SGD1.42cts is in line, at 46% of our FY18E.
• DPU fell 17.6% y-o-y from a 13.7% increase in units and lower NPI following the conversion of CWT Commodity Hub into multi-tenancies and divestment of its Hi-Speed Logistics Centre property in May. These were partly offset by nine new Australian properties, which lifted Australian revenue contributions from 20% to 23%.
• Cache has delivered on boosting its Commodity Hub committed occupancy, and we see stronger growth as rents stabilise and leasing demand picks up. Our forecasts and DDM-based Target Price are unchanged (WACC 7.8%, LTG 1.5%). BUY.

Singapore Rental Reversions -4.0%

Revenue jumped 7.7% y-o-y while NPI was lower by 0.1% y-o-y. There were incremental contributions from its nine-property Australian portfolio acquired in Feb 2018 and 51 Alps Ave with a new lease in place and rental top-up. These were offset by the conversion of its master lease at CWT Commodity Hub to multi-tenancies in April and divestment of Hi- Speed Logistics Centre in May.

2Q18 DPU fell 17.6% y-o-y to SGD1.42cts as its Sep 2017 SGD100m rights issuance expanded its unit base by 13.7%. While portfolio committed occupancy fell q-o-q from 97.3% to 96.8% with Singapore occupancy down from 96.9% to 95.4%, strong leasing at Commodity Hub pushed committed occupancy from 86.0% as of 12 Apr to 92.7% by end-June.

Having secured 925k sf of leases YTD, leases expiring in the rest of the year should remain manageable at 3.1%. Management is actively managing commitments for 28.0% (of gross rental income) for expiring leases in FY19, being cognisant that rentals may recover from 2H18.

For the first time, Cache disclosed rental reversions, of -4.0% in 2Q18. This was a slight improvement from -4.8% YTD.

Source: Maybank Kim Eng Research - 31 Jul 2018