ANALYSTS GAVE Cache Logistics Trust a ‘thumbs-up’ this week after it announced distribution per unit of S$2.086 cents for 2Q11, translating to annualized distribution yield of 8.4% based on Thu's close price of 99 cents.
DBS Vickers and UOBKH have ‘Buy’ calls on the stock with target prices at S$1.11 and S$1.20, while Stanchart, Macquarie and CIMB have ‘Outperform’ calls, with target prices of S$1.10, S$1.18 and S$1.24 respectively.
The increased distributable income of S$13.3 million was due largely to the upward rental adjustments for the majority of the portfolio and the contributions from acquisitions completed during the quarter under review, said Mr Daniel Cerf, the CEO of ARA-CWT Trust Management (Cache).
According to Colliers International, average monthly gross rents for prime factory and warehouse spaces surged between 6 and 7 % quarter-on-quarter during the second quarter of 2011, the fastest quarterly growth in three years.
Three new acquisitions comprising of the APC Distrihub and Kim Heng warehouses in Singapore, as well as the Jinshan Chemical warehouse in China contributed to a total of nine quality logistics properties in the Cache portfolio.
The portfolio’s weighted average lease to expiry or ‘WALE’ as at 30 June 2011 was 5.1 years. The long WALE provides a high degree of predictability in cash flow and stability in earnings.
On 20 July 2011, the trustee of Cache entered into a sale and purchase agreement to acquire a warehouse facility in Loyang Industrial Estate from Air Market Express (S) Pte Ltd via an acquisition and leaseback arrangement for S$13.0 million.
The property has 42 years remaining on the current lease and Air Market will leaseback the facility for a term of five years with an option to renew for an additional term of five years translating to NPI yield of about 7.4% that is within the range achieved for logistics properties in eastern Singapore.
”Occupancy remained full, with over 89% taken up by MNCs and government agency clients. Cache will continue to focus on Singapore and China for acquisitions.
"The CEO has cited Shanghai, Tianjin, Beijing and Chengdu cities preferred for target acquisitions,” according to CIMB’s recent report.
Its portfolio of investment properties stood at S$805.1 million at the end of 30 June 2011, compared to S$744.0 million at the end of 31 December 2010.
The portfolio’s weighted average lease to expiry of 5.1 years as at 30 June 2011 provides a high degree of predictability in cash flow and stability in earnings.
”Given the master lease structure of Cache’s portfolio, with rental escalations of 1.5% per annum, investors are assured of a stable distribution.
"The four acquisitions since the start of the year (3 in Singapore and 1 in Shanghai) for about S$67 million increased its asset base by 10% to S$818 million.
"Debt headroom is about S$66 million before reaching the regulatory limit of 35% without a credit rating.
"We believe acquisitions will be initially funded by debt, unless they are more substantial in quantum,” according to Macquarie analysts in its recent report.
Aggregate leverage stood at 29.1% at the end of June 2011. The overall all-in interest cost for 2Q2011 was 3.92%, down from 4.37% in the previous quarter.
Cache’s strategy is to invest in income-producing real estate used for logistics purposes in Asia-Pacific.
It now holds a portfolio of quality logistics warehouse properties primarily located in Singapore’s established logistics clusters.
The trust is managed by ARA-CWT Trust Management (Cache) Limited, a JV between ARA Asset Management and CWT.