CLT – DBSV

Growing presence in Changi

• Acquisition of Changi North Warehouse at initial yield of 7.7%

• Accretive to earnings, gearing to head up to 32.6%

• BUY, TP raised to S$1.13

Strategic acquisition of Changi North warehouse for S$35.2m. Cache Logistics Trust (Cache) announced the acquisition of a 4-storey ramp-up warehouse in Changi North International LogisPark for S$35.18m (all in cost of S$37m). The facility has a niche location in Changi North, which has limited upcoming competing supply, thus enjoying robust demand for space. The area caters to endusers operating in the air cargo industry. The vendor, Pan Asia Logistics, will lease back the facility for 10 years.

Accretive to earnings, gearing to head up to 32.6%. Initial yield is estimated to be c7.7%, in line with its current implied trading yield. We note that Cache has the financial capability to fund this acquisition. Assuming it is fully debt-funded, gearing is estimated to head towards 32.6%, which means that deployable headroom (to its regulatory limit of 35%) will be limited to a further cS$30m.

Further acquisitions could involve capital raisings. There is a visible pipeline of completed / completing warehouse properties from its sponsor CWT/C&P which could be on offer for Cache to acquire in the medium term. Hence, obtaining a credit rating will provide the REIT greater financial flexibility to gear up beyond 35%. In our view, potential acquisitions could also involve some form of capital raising exercise, which we have not factored into our estimates.

Maintain Buy, TP raised slightly to S$1.13. Our estimates are raised slightly to account for this acquisition. Cache continues to offer attractive prospective yields of close to 9%, which should have more upside in the event of more acquisitions.