not vested
Cache LogisticS TRUST
Revenue up 8.4% YoY, Distributable income up 9.6%. Cache Logistics Trust reported growth of 8.4% YoY in its Q313 revenue to S$20.7mil, which was in line with our projections. Meanwhile, distributable income for the quarter was up by 9.6% - approx. 2.2% lower than our forecast.
Factors behind the revenue and distributable income growth include annual rent escalations of 1.25-2.5% and rental contribution from new acquisitions in FY12 and FY13.
Enjoying resilient growth. Cache’s overall portfolio occupancy is maintained at 100%, reflecting the resilient nature of its master leases across the majority of its portfolio assets. Further underscoring its resilience, Cache notably has no renewal risk for the remainder of FY13 and has only 3% of its portfolio by GFA that is due for lease expiry in FY14 (refer to Fig 1).
We also note that lease renewal progress for Jinshan chemical warehouse is well ahead of its June 2014 expiry, reflecting Cache’s commitment to engage in active re-leasing to minimize renewal risks.
Larger influx of warehouse supply not a major concern. A record supply of warehouse space is expected to come on-stream in FY14 and FY15 (refer to Fig 2). We note, however, that the bulk of the upcoming supply includes committed and owner-occupied space as well as non-competing strata-titled and Jurong Island industrial space, thus mitigating competition risks for Cache.
Minimal refinancing risks. Cache’s leverage currently stands at 29.2%, with 70% of its borrowings already hedged into fixed rates through interest rate swaps. We believe both refinancing risk and interest rate risk are negligible for Cache.
Notably, Cache will not be facing any debt refinancing till FY15. In terms of its exposure to rising interest rates, we estimate that a 1% increase in interest rates would lower our projected FY14 DPU by 1.5%.
Maintain BUY on FV S$1.36. Cache declared a DPU of 2.13c in Q313, bringing its YTD DPU to 6.5c. This forms 76.5% of our full-year DPU forecast of 8.5c. As mentioned in an earlier update on 11 Oct 2013, we believe there is greater valuation comfort at current FY13-14 yield levels of 7.1-7.2% and maintain our BUY recommendation on a higher FV of S$1.36.
Source: AmFraser