Cambridge – Phillip

1QFY10 Results

• 1Q10 revenue of $18.6 million, net property income of $16.3 million, distributable income of $11.1 million.

• 1Q10 DPU of 1.27 cents.

• Disposal of assets worth $21.5 million, 10% take-up for 4Q09 DRP

• Maintain hold recommendation, fair value $0.51

Consistent Results

Cambridge registered 1Q10 revenue of $18.6 million (+1.3% y-y, -1.5% q-q), net property income of $16.3 million (+1.2% y-y, -2.7 q-q) and distributable income of $11.1 million (7.8% y-y, -7.2% q-q). DPU for the quarter was 1.27 cents (-1.3% y-y, -7.5% q-q). Stable growth y-y resulted from the annual rent increases. However as the Trust had started divesting assets from 4Q09, q-q results reflected the decrease in income. DPU was higher in 4Q09 compared to 1Q10 due to the dividend income from AIMS AMP Industrial REIT. Contribution in 1Q10 was minimal at $0.1 million. Cambridge has since fully divested its interest. Portfolio occupancy continues to climb and improved to 99.9%.

We continue to see progress on the assets divestment program. Cambridge disposed another 32 strata units of the 48 Toh Guan Road East property for $21.5 million, approximately 7.5% above book value. To-date, it has sold $28.1 million of assets. The Trust has classified on its balance sheet another $70 million of assets for disposal. The Dividend Reinvestment Program (DRP) was carried out for 4Q09 and received an approximate 10% take-up rate, translating to $1.1 million of funds. The proceeds from the divestments and DRP program are earmarked for asset enhancements as well as reducing debt.

Capital management

To recap, Cambridge has total debt of $390.1 million, which is due in 2012. Gearing is at 42.6%. Management has a long term gearing target of 30-35% and this will be achieved through a combination of divesting non-core assets as well as accumulating funds from the DRP.

Forecasts

The sales of the assets above book value bolster our view that industrial capital values are holding up well and should not see further weakening. We also like to see the amount of debt reduced as we feel it is the main overhang on the Trust, with a gearing ratio of 42.6%, it is one of the highest geared REIT. We make some changes to our assumptions, raising our occupancy projection to 99% while incorporating loss of revenue from the divestment assets and also increasing the amortised loan transaction amount to the distributable income. We further assumed that the trust reduced its gearing to 39% at year-end. Our DPU for FY10E is 4.92 cents, which translate to a yield of 9.7%. We raised our fair to $0.51 and maintain our hold recommendation.