Cambridge – CIMB

Worth a chance

• Maintain Outperform. We expect new demand for industrial space to ebb in tandem with an expected economic downturn. CCT has a small asset size with tenant concentration risk, unlike its much larger peers, A-REIT and MLT. Nonetheless, we expect its rental income to stay visible in the medium term with all its tenants on long leaseback arrangements with built-in rent increases. Management is working on the refinancing of significant short-term debt that would be due by Feb 09 and early closure could provide catalysts in the short term.

• Unchanged DDM-derived target price of S$0.52 (discount rate 9.6%). Despite our earlier increase in cost-of-debt assumptions, forward dividend yield in FY09 remains attractive at 17.3% due to overselling of the stock. CIT remains the cheapest industrial REIT under our coverage, with a P/BV of 0.36x and forward yields of 17.3%. S-REITs are trading at 0.51x P/BV and forward yields of 13.6% on average. We remain positive on the resilience of the industrial sector, anchored by a long weighted average remaining lease term of 5.9 years in CIT’s case. Maintain Outperform.