CLT – CIMB

Awaiting acquisitions

1Q13 was a steady quarter, led by organic growth from rental step-ups within the portfolio master leases. We look forward to the rest of FY13 as contributions from Precise Two kicks in and expect debt headroom to be utilised for accretive debt-funded acquisitions.

1Q13 DPU met our and consensus estimates at 26% of our FY13 forecast. We lower FY13-15 DPUs, factoring in Cache’s recent equity issuance, offset partially by a higher acquisition assumption. Our DDM-based target price, however, is raised on a lower discount rate of 7.1% (previously 7.7%). Maintain Outperform, with accretive acquisitions as catalysts.

Steady quarter

1Q13 DPU grew 7% yoy on the back of a 12% NPI increase due mainly to rental contributions from the acquisitions of Pan Asia and Pandan Logistics Hub in FY12. Qoq, DPU was up 4% due to some cost savings, with equity dilution kicking in only towards the end of 1Q. A new lease was signed within APC Distrihub with Agility Logistics, leaving Cache with no remaining leases that will expire in 2013.

Acquisition growth

We look forward to contributions from Cache’s recent acquisition of Precise Two which will kick in from 2Q13. NPI yield is at a high 8.7% compared to 7.1% on its existing portfolio. With rental step-ups of 4.0% every two years being incorporated into the master lease, we expect Precise Two to add to the resilience of its existing portfolio and contribute to organic growth.

Asset leverage is at 29% after the recent placement, leaving Cache with ample debt headroom for accretive acquisitions in Singapore, Malaysia and China. Meanwhile, management is also on the search for asset enhancement and re-development opportunities to enhance portfolio quality. Given bigger debt headroom, we now factor in a larger S$120m (previously S$100m) of acquisitions for FY13.

Maintain Outperform

Maintain Outperform as we continue to like Cache for its resilient portfolio, built-in organic growth via rental step-ups and quality assets.