CFA Society Singapore
SINGAPORE (Oct 29): RHB Research and OCBC Investment Research say Cache Logistics Trust’s (Cache) 3Q18 results came within their respective expectations.
Revenue increased 14.8% y-o-y to $31.5 million, mainly due to the nine Australian warehouses which were acquired in Feb, higher revenue from Schenker’s new lease agreement, the top-up to market rental following the 51 Alps Avenue resolution, and higher revenue from CWT Commodity Hub.
NPI increased 8.1% y-o-y to $23.1 million. 3Q18 DPU from operations dropped 3.3% y-o-y to 1.439 cents, while DPU from capital dropped 32.1% y-o-y to 0.036 cents. As a result, total DPU dropped 4.3% y-o-y to 1.475 cents.
In a Monday report, OCBC analyst Deborah Ong says Cache is positioned for the industrial sector recovery given its lease expiry profile and high-proportion of multi-tenanted properties. She also expects rents within the portfolio to bottom at end-2018 or early 2019.
“We are cognisant of the potential impact of US-China trade tensions on business sentiment, but still expect to see operational improvement from Cache with the improvement in the demand-supply balance,” says Ong.
OCBC is lowering its fair value from $0.81 to $0.78, after adjustments. Using Bloomberg consensus, Cache is trading at a blended forward dividend yield of 8.6%.
Earlier this month, Cache had announced the disposal of its only asset in China, Jinshan Chemical Warehouse, for RMB 87 million ($17.3 million), a 13% premium to its latest valuation.
“We see the move positively as the divestment should allow management to better focus its efforts on Singapore and Australian portfolio. The proceeds should be used to repay debt,” says RHB analyst Vijay Natarajan.
In Jul 2018, ARA Asset Management acquired full control of the REIT’s manager and property manager by acquiring the remaining stake from CWT. ARA also holds a 9.2% stake in Cache.
Natarajan sees the move is positive as it will help quicken the decision making process and presents growth opportunities for Cache via ARA’s diversified market presence and fund management expertise.
ARA was also the key contributor for Cache’s Australian diversification and Natarajan believes Cache will potentially look at ARA’s Korean logistics assets at an opportune time.
“Maintain buy and target price of $0.84,” says Natarajan, “Cache offers a FY18/19F yield of more than 8%, which is significantly higher than that of S-REITs of 6.4%.”
As at 11.25am, units in CacheLog are trading at 71 cents, giving it a FY19F yield of 8.5%.