SINGAPORE (Jan 19): Analysts point to signs of stabilisation at Cache Logistics Trust, despite a 9.8% drop in its distribution per unit (DPU) to 1.597 cents for the 4Q17 ended December.
The lower DPU was mainly attributed to an enlarged units base after completing a rights issue in Oct 2017. Excluding the effects of the rights issue, Cache’s 4Q DPU would have fallen by a smaller 1.1%.
Income available for distribution rose by 2.5% to $17.1 million during the quarter.
In 4Q17, gross revenue grew 8.5% to $29.6 million, while net property income (NPI) was up 10.2% to $23.5 million.
See: CacheLog reports lower 4Q DPU of 1.597 cents on rights issue; divesting Hi-Speed Logistics Centre for $73.8 mil
“With downside limited on the back of settlement of Schenker lease in favour of Cache coupled with diminishing downside risk to rental reversions as industry supply tapers off, we believe that the worst could be over for Cache,” says Derek Tan, an analyst at DBS Group Research.
As such, DBS is keeping Cache at “hold” but raising its target price to 90 cents, from 83 cents previously, on the back of lower cost of equity assumptions.
The trustee-manager of Cache in Oct 2017 came to an amicable resolution with its tenant Schenker over a dispute in relation to the property at 51 Alps Avenue, otherwise known as Schenker Megahub.
Under a fresh lease agreement, Schenker will lease 100% of the property for a period of 46 months up till Aug 31, 2021.
As part of the resolution, the trustee will also receive a lump-sum payment of $8.2 million.
See: Cache Logistics says Schenker Megahub dispute settled amicably
In a separate filing to SGX on Thursday, the manager of Cache also announced it has entered into a sale and purchase agreement to divest Hi-Speed Logistics Centre located at 40 Alps Ave on for $73.8 million.
According to Deborah Ong, an analyst at OCBC Investment Research, the divestment is part of Cache’s active portfolio rebalancing strategy.
“In this vein, we are positive on Cache's lowered gearing of 36.3% post the rights issue, as it offers Cache financial flexibility for future acquisitions,” she adds.
However, OCBC is placing Cache’s “hold” rating and fair value estimate of 81 cents under review.
“We expect rental reversions to remain negative and volatile through 2018, with some stabilisation towards the end of this year,” Ong says.
On the other hand, CIMB Research’s lead analyst Yeo Zhi Bin opines that Cache’s 4Q17 performance has already shown “initial signs of stabilisation” on a quarter-on-quarter basis.
“Looking to the next few quarters, we expect the DPU decline to narrow y-o-y,” Yeo adds. “We await catalysts in the form of better clarity over the renewal of CWT Commodity Hub (where the master lease is due to expire in Apr 2018) as well as potential Australian acquisitions.”
CIMB is keeping its “hold” call on Cache with a higher target price of 85 cents, from 79 cents previously, on the back of lower cost of equity assumptions.
As at 1.11pm, units of Cache Logistics Trust are trading flat at 88 cents. According to DBS forecasts, this implies an estimated price-to-earnings ratio of 14.7 times and a distribution yield of 7.2% for FY18.
