Cambridge – Phillip

CIT reported 1QFY078results with gross revenue of S$17.6 million (+60.8% YoY), net property income of S$15.5 million (+66.0% YoY) and distributable income of S$12.6 million (+71.3% YoY). DPU grew 10.7% from 1.434 cents to 1.588 cents. This represents an annualized DPU of 6.387 cents.

Portfolio growth. CIT completed 2 acquisitions in the 1st quarter, bringing the total number of properties in its portfolio to 42, valued at S$956.4 million. In addition, CIT has signed option agreement for 2 properties worth S$18 miilion and S$75.2 million worth of MOU.

Capital management. CIT has total borrowings of S$358.7 million with S$337 million due for maturity in Feb 2009. It has a further S$131 million in available facility to fund its acquisitions. In Feb, CIT entered into an interest rate swap which provides an allin funding cost of 3.32% until 2013. The current gearing of CIT is 36.9%.

Plans ahead. The Oxley Group took a 20% stake in Cambridge Industrial Trust Management, the manager of CIT in Feb. Oxley is a private investment house with vast experience in Australia and the Asian regions. Oxley’s experience and expertise will be beneficial to CIT regional expansion plan. CIT is currently exploring investment opportunities in Malaysia and China and management reveals that these might crystallise later this year.

Valuation and recommendation. We like CIT for its stable underlying cash flow as well as its management’s execution. CIT managed to lock-in the cost of borrowing at a time when interest rate was at one of the lowest ever. It is also able to keep its expansion on schedule while maintaining a comfortable gearing ratio. With Mitsui and Oxley as its strategic partners, CIT is able to expand regionally without being at a disadvantage compared to some of the bigger players with a parent sponsor. We updated our projections with the recently acquired properties and continue to adopt a conservative approach in not assuming any unannounced acquisitions in our model. We have a DPU forecast of 6.44 cents for FY08, which translates to an attractive distribution yield of 9.33%. Maintain Buy.