Towards Financial Freedom

Cache Logistics Trust - Bracing For Headwinds Ahead

kiasutrader
Publish date: Wed, 28 Jan 2015, 02:38 PM
Cache's 4Q14/FY14 results were in line with  DPU  changing  +0.4%/-0.8% YoY  to 2.146/8.573 cents,  meeting 24.5%/97.4% of our full-year  forecast. Reiterate NEUTRAL with a DDM-derived TP of SGD1.21 (CoE: 7.7%, TG: 0%),  implying  8.6%  total  return  upside.  The  supply  dynamics  for warehouse  spaces  in  Singapore  remain  unfavourable  as  additional stocks  could  put  pressure  on  rental  fees  and  occupancy  rates.  Also Singapore's PMI of 49.6 in December was the lowest since Feb 2013.
 

4Q14/FY14 results in line.  Cache Logistics Trust's  (Cache)  4Q14/FY14 revenue  changed  -0.4%/+2.3%  YoY  to  SGD20.6m/SGD82.9m.  The yearly  increase  was  driven  by  rental  escalation  and  the  acquisition  of Precise  Two  last  April.  4Q14/FY14  distributable  income  increased 1.0%/2.0% YoY to SGD16.8m/SGD66.9m. Weighted average lease term to expiry of the portfolio is  4.1 years (3Q14:  3.6 years), with  27% of  the leases  due  to  expire  in  2015-2016.  The  all-in-financing  cost  for  FY14
averaged  3.30%  (FY13:  3.48%),  with  61.7%  of  total  debt  hedged. Gearing stood at 34.9% (3Q14: 35.0%)
 

Portfolio  occupancy  dips.  Cache's  portfolio  average  occupancy  rate dipped modestly  to  97.9%  from  99.5%  in 3Q14. For leases  expiring in 2015,  Cache  has  retained  60%  of  its  current  end-users  in  addition  to signing  on  new  tenants.  It  has  also  successfully  renewed  the  master lease at CWT Commodity Hub with CWT Limited for anot her three years beyond the Apr  2015 expiry.  Its build-to-suit development project, DHL Supply Chain Advanced Regional Center (DSC ARC),  is now two-thirdsinto completion, and is on track to be completed in 2H15.
 

No  refinancing  required  for  the  next  two  years.  The  Trust  has refinanced  SGD375m  loan  facilities  with  a  SGD400m  club  loan comprising:  i) 4-year term loan facility of SGD185m, ii) 5-year term loan facility of SGD150m,  and iii) 4-year revolving credit facility of SGD65m. This  extends  its  weighted  average  debt  maturity  to  4.1  years  from  1.6 years.

Bleak  outlook  for  warehouse  spaces.  We  are  cautious  on  the impending  amount  of  new  industrial  warehouse  spaces  that  could  put pressure  on  industrial  rents  and  occupancy  rates.  Some  properties  in Cache's  portfolio  were  already  revalued  downwards  YoY  in  FY14. Reiterate NEUTRAL with an unchanged TP of SGD1.21.
















Source: OSK-DMG
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