CLT – AmFraser

Acquisition engine running on full steam

Flexing its muscles on acquisitions. Cache announced that it has entered into a call option agreement with industrial developer Precise Development (PDPL) to acquire Precise Two, a newly‐completed three‐storey fully ramp‐up warehouse with a gross GFA of approx. 284,381 sq ft. Purchase consideration for the property is around S$55.2mil. Subject to attaining regulatory approval from JTC Corporation, the acquisition is expected to be completed in April 2013.

Beefing up its competitive position in the logistics space. Cache’s planned acquisition of Precise Two is, in our opinion, hugely complementary to its existing portfolio strengths. Boasting approx. 23% market share of Singapore’s ramp‐up logistics warehouses, Cache’s proposed acquisition of Precise Two distinctly accelerates its competitive edge. Given Precise Two’s quality technical specifications such as heavy floor loading of 50kn/m2 for the ground floor, strategic location in the Jurong Industrial Precinct as well as its proximity to major expressways PIE and AYE, the deal, should it go through successfully, would certainly be a major feather in its cap.

Harvesting diversification rewards. Upon completion of the acquisition, Cache and PDPL would enter into an agreement to which Precise Two would be leased back to PDPL. As the master lease agreement provides for a lease term of six years with a renewal option for an additional six years, the acquisition would strengthen Cache’s lease expiry profile and reduce its asset concentration risk on CWT Commodity Hub. CWT Commodity Hub’s revenue contribution is estimated to fall from 37.8% to 36.5% following the acquisition of Precise Two. Another plus for Cache would be a reduced reliance on master lessees CWT and C&P for rental income.

Yield‐accretive. We assume that the acquisition of Precise Two would be financed en