Cambridge – CIMB

Steady income generator

• Assets have nearly doubled in size since listing. Listed on the SGX on 25 Jul 06, Cambridge Industrial Trust (CIT) is a real estate investment trust (REIT) that invests in income-producing industrial assets. Its assets have nearly doubled from S$519m at the time of listing to S$967m as at 30 Jun 08. Properties under management also increased from 27 to 43. All of CIT’s assets are located in Singapore. However, management has a mandate to acquire industrial properties in Asia.

• Visible earnings from long leases with built-in rent increases. Long lease tenures averaging 6.4 years, built-in rent increases, controlled property expenses as well as resilient demand from the manufacturing sector add visibility to CIT’s earnings in the medium term.

• Full shariah compliance positive for future funding. CIT is in the midst of conversion to full shariah compliance, which will enable it to cultivate a new investor pool when it raises capital or issues debt.

• Initiate with Outperform rating and target price of S$0.90. Using DDM valuation, we initiate coverage with a target price of S$0.90 (discount rate 8.0%, terminal growth 2%). This offers a total prospective return of 72% from potential price upside of 61% and a forward yield of 11%. Its current price of S$0.56 is at an all-time low since listing and a 29% discount to its NAV of S$0.79, representing an attractive entry point in view of its visible earnings and attractive dividend yields.

Link – Table