CLT – CIMB

Much-awaited acquisition

Cache has announced itsmuch-awaited acquisition from sponsorCWT after its private placement in Mar. Pandan Logistics Hub marks Cache’s largest acquisition afterits IPO,andwill expand its AUM and YTD acquisitions to S$944m and S$101m,respectively.

We adjustDPUs factoring in Cache’s placement, partially offset by higher YTD acquisitions (S$101m) vs. our S$80m expectation and new acquisition assumption of S$80m next year. Our DDM-based target price (discount rate: 8.5%) drops marginally. Maintain Outperform.

What Happened

Cache has announced its acquisition of Pandan Logistics Hub, a newly developed five-storey ramp-up logistics warehouse (329,109sf GFA) from sponsorCWT Ltd. Purchase consideration of S$66m (S$201psf GFA) was at a marginal 0.4% discount to average valuation by independent valuers and will be funded fully by debt.

Asset will be master-leased to CWT Ltd for the first three years at NPI yield of 7.6%, andnet rents of S$1.32psf with annual rental escalation of 2.5-2.6%. Cache had also entered into lease with CWT for a further 2-4 years for the first and fifth storeys. Acquisition is subject to approval through EGM and we expect completion within two months.

What We Think

The acquisition was very muchanticipatedafter a somewhat unexpected S$59m placementby Cache in Mar.YTD acquisitions of S$101m surpassed our FY12 assumed acquisition of S$80m and would take Cache’s AUM to S$944m. Overall NPI yield of 7.6-7.7% for the two acquisitions areaccretive over funding cost (42:58debt-equity funding) and FY11 NPI yield of about 7.3%. Asset leverage is expected to rise to 32% post-acquisition and should still leave ample debt headroom for acquisitions if Cache obtains a credit rating.

What You Should Do

We factor in the higher-than-expected YTD acquisitions and new acquisition assumption of S$80m for FY2013. We continue to like Cache for its stable and resilient yieldsand pipeline from sponsor.Maintain Outperform.