020712 cache log trust - ocbc

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Addition of another quality asset

Cache Logistics Trust (CACHE) had received approval from unitholders

pertaining to the proposed acquisition of Pandan Logistics Hub and the

entry of a master lease agreement with CWT Limited. With theaddition of this prime logistics property, CACHE will have 12 quality

assets under management (eight with ramp-up features) and an

enlarged GFA of ~4.83m sq ft (+7.3%). As a note, Pandan Logistics

Hub is expected to contribute S$5.2m in rental income to the REIT in

the first year, translating to an initial NPI yield of 7.6%. This is likely

to add ~0.28 S cents to its DPU on an annualized basis, based on our

estimates.

Refinancing on more favourable terms

CACHE also embarked on a capital management exercise to increase

the amount and duration of its debt facility, consistent with our

expectations communicated in our 11 Jun report. According to the

May 2012 circular to unitholders, a new bank facility of S$375.0m will

be used to retire its existing bank facility of S$203.0m and repay its

S$40m unsecured loan, while an projected S$79.6m (including

S$11.0m refinancing costs) is expected to be used to finance the

Pandan Logistics Hub acquisition. Notably, the effective interest rate

for the new bank facility is 2.8% plus SOR, which is at 30bps below its

existing rate of 3.1% plus SOR. Hence, CACHE is likely to gain from

interest savings going forward.

Retain BUY with higher fair value of S$1.18

We continue to like CACHE for its resilient portfolio (100% occupied;

master lease arrangements), healthy financial position and attractive

FY12F DPU yield of 7.9%. We now incorporate the acquisition of

Pandan Logistics Hub into our model as the transaction is expected to

complete by 9 Jul. We also tweak our estimates to reflect a marginallylower cost of debt. Accordingly, our fair value is raised from S$1.11 to

S$1.18. Reiterate BUY on CACHE.

BEEFING UP MARKET POSITION Approval on proposed acquisition

Enhanced debt profile

Valuation remains attractive

2 Jul 2012Company Update

CACHE LOGISTICS TRUST |BUY

Asia Pacific Equity ResearchSingapore | REITs

BUY (maintain)Fair value S$1.18

add: 12m dividend forecast S$0.08

versus: Current price S$1.05

12m total return forecast 20%

Analysts

Kevin Tan (Lead) +65 6531 9810

[email protected]

Eli Lee +65 6531 9112

[email protected]

Key information

Market cap. (m) S$734.9 /

USD578.8

Avg daily turnover (m) S$1.0 /

USD0.8

Avg daily vol. (m) 1.0

52-wk range (S$) 0.915 - 1.06

Free float (%) 81.6

Shares o/s. (m) 699.9

Exchange SGX

BBRG ticker CACHE SP

Reuters ticker CALT.SI

ISIN code K2LU

GICS Sector FinancialsGICS Industry REITs

Top shareholder CWT - 10.1%

Relative total return 1m 3m 12m

Company (%) 2 5 19

STI-adjusted (%) 0 8 22

Price performance chart

0.68

0.81

0.95

1.08

1.22

1.35

Jul-11 Oct-11 Jan-12 Apr -12

2200

2660

3120

3580

4040

4500

Fair Value CACHE SP FSSTI

Shar e Pr i ce (S$) Index Level

`

Sources: Bloomberg, OIR estimates

Industry-relative metrics

0th 25th 50th 75th 100th

PB

PE

ROE

Beta

Mkt Cap

Company Indust r y Aver age

Percent i le

Note: Industry universe defined as companies under identical GICS classificationlisted on the same exchange.Sources: Bloomberg, OIR estimates

Key financial highlights

Year Ended 31 Dec (S$ m) FY10 FY11 FY12F FY13F

Gross revenue 42.4 64.6 72.1 77.1

Total property expenses -1.1 -2.7 -3.4 -3.3

Net property income 41.4 61.9 68.7 73.9

Income available for distribution 35.4 52.5 57.0 60.9

DPU per share (S cents) 5.6 8.2 8.3 8.6

Cons. DPU (S cents) na na 8.2 8.6

PER (x) 10.7 9.6 14.4 13.4

P/NAV (x) 1.2 1.1 1.1 1.1

ROE (%) 21.6 11.9 8.1 8.5

Gearing (%) 23.0 29.1 32.0 32.5

Please refer to important disclosures at the back of this document. MICA (P) 035/06/2012

MARKET CAP: USD 578.8M AVG DAILY TURNOVER: USD 0.8M


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OCBC Investment Research

Singapore Equities

2

Exhibit 1: Details on proposed acquisition

Source: Company

Exhibit 2: Rationale for acquisition

Source: Company


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OCBC Investment Research

Singapore Equities

Company financial highlights

Company financial highlights

Income statement

Year Ended 31 Dec (S$ m) FY10 FY11 FY12F FY13F

Gross revenue 42.4 64.6 72.1 77.1

Total property expenses -1.1 -2.7 -3.4 -3.3

Net property income 41.4 61.9 68.7 73.9

Net financing costs -6.1 -8.9 -11.9 -12.8

Manager's management fees -3.3 -5.0 -6.1 -6.1

Trustee' Fees -0.7 -1.5 -1.2 -1.3

Net income 31.2 46.5 49.5 53.7

Total return after tax 62.0 69.8 50.3 55.6

Net effect of non-taxable items -26.6 -17.3 6.7 5.3

Income available for distribution 35.4 52.5 57.0 60.9

Balance sheet

As at 31 Dec (S$ m) FY10 FY11 FY12F FY13F

Investment properties 744.0 842.8 965.6 977.6

Properties under development 0.0 0.0 0.0 0.0

Cash 8.0 12.1 12.1 14.1

Total current assets 8.1 12.3 12.2 14.2

Total assets 752.2 855.2 978.1 992.1

Current liabilities ex debt 3.1 6.0 5.3 5.7

Debt 172.7 248.9 312.9 322.9

Total liabilities 177.1 261.1 324.7 335.3

Unitholders' funds 575.1 594.1 653.4 656.8

Total equity and liabilities 752.2 855.2 978.1 992.1

Cash flow statementYear Ended 31 Dec (S$ m) FY10 FY11 FY12F FY13F

Net income 31.2 46.5 49.5 53.7

Adjustments 8.6 12.7 16.4 17.3

Operating income before working cap chgs 39.8 59.2 65.9 70.9

Change in working capital 1.8 2.8 -0.6 0.4

Cash generated from operating activities 41.6 62.0 65.2 71.3

Cashflow from investing activities -713.3 -74.3 -122.0 -10.0

Cashflow from financing activities 679.7 16.4 56.8 -59.3

Change in cash 8.0 4.1 0.0 2.0

Cash at beginning of period 0.0 8.0 12.1 12.1

Cash at end of period 8.0 12.1 12.1 14.1

Key rates & ratios FY10 FY11 FY12F FY13F

DPU per share (S cents) 5.6 8.2 8.3 8.6

NAV per share (S cents) 90.6 93.0 92.9 92.8

PER (x) 10.7 9.6 14.4 13.4

P/NAV (x) 1.2 1.1 1.1 1.1

NPI margin (%) 97.4 95.8 95.3 95.7

Net income margin (%) 73.5 71.9 68.6 69.6

Gearing (%) 23.0 29.1 32.0 32.5

DPU yield (%) 5.3 7.8 7.9 8.2

ROE (%) 21.6 11.9 8.1 8.5

ROA (%) 16.5 8.7 5.5 5.6

Sources: Company, OIR forecasts


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Important disclosures

OCBC Investment ResearchSingapore Equities

SHAREHOLDING DECLARATION:

The analyst/analysts who wrote this report hold NIL shares in the above security.

DISCLAIMER FOR RESEARCH REPORT

This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed inwhole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation forthe subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that theinformation contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy orcompleteness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained inthis report is subject to change without notice. We have not given any consideration to and we have not made any investigation ofthe investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, nowarranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result ofthe recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from afinancial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives,financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd,OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors andofficers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking andother investment or securities related services for the corporations whose securities are mentioned in this report as well as otherparties generally.

Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (orresponsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions,conclusions and other information in this document that do not relate to the official business of OCBC Investment Research PteLtd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither givennor endorsed.

RATINGS AND RECOMMENDATIONS:

- OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented.

- OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon.- As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates totalreturns within +/-10% range; a SELL rating indicates total returns less than -10%.- For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLDtrading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

Co.Reg.no.: 198301152E

Carmen LeeHead of Research

For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

020712 cache log trust - ocbc

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