CLT – DBSV

Steady as she goes

• Maiden DPU of 1.71 Scts above IPO forecasts

• Adjusting DPU estimates upwards by 3% on lower interest costs assumptions

• Maintain BUY, TP revised to S$1.08; total return of 15%

DPU of 1.71 Scts (1.4% above IPO forecast). For the period of 12th April – Jun’10, Cache Logistics Trust (Cache) reported gross revenues and net property income of S$12.9 m and S$12.6 m that were 0.2% and 1.3%, respectively, above IPO forecasts. Distributable income came in at S$10.8m, 1.4% above forecasts due to lower than projected interest costs (achieved 4.14% all in costs, against estimate of 4.5%), translating to DPU of 1.71 Scts Note that while Cache will pay out dividends quarterly, its first distribution will be paid together with the next quarter’s distribution.

Strong financial metrics, adjusting earnings up from lower interest expense. Balance sheet metrics is strong with a low gearing of 25.5% with interest cover of over 9.3x. We adjust our forecasts slightly upwards given lower locked in all-in rates (4.14% vs 4.5% previously). DPU estimates are raised by 3%

Catalysts: Acquisitions to drive further earnings growth. Apart from an in-built 1.5% p.a growth in topline from its master lease structure, we believe that further earnings growth will have to be acquisition driven; we have assumed S$100m worth of new assets in our numbers. Apart from potential 3^rd
party acquisitions, Sponsor CWT offers a visible pipeline of logistics properties for injection in the medium term (13 properties, 2.9 sqft of GFA).

Maintain BUY, TP revised to S$1.08. DPU is relatively secured. Cache is trading at FY10-11F yields of 8.0-8.3%, 140 bps above sector’s average of 6.6%, which is attractive. Price catalysts will hinge on (i) acquisitions to grow earnings; and (ii) Cache obtaining a rating that could improve its financial flexibility.