CLT – CIMB

The wait continues

Cache’s 4Q13 revenue and DPU translate to 25% and 24% of our respective quarterly estimates. Taken together with its 9M earnings, full-year revenue and DPU largely met our expectations, at 98% and 99% of our respective FY13 estimates. With its solid portfolio and no debts due to be refinanced in FY14, we believe Cache will continue to provide stable dividends while we await news of potential acquisitions. We maintain our Add rating with an unchanged DDM-based target price (discount rate: 7.8%) of S$1.33.

Another quarter with strong earnings

Cache Logistic just announced its FY13 results, posting revenue of S$81m (+11.4% yoy) and DPU of 8.64Scts (+3.3% yoy). The higher revenue was mainly due to Two Precise, acquired in February 2013, as well as the built-in rental escalation within the portfolio. 4Q13 revenue grew by 8.2% qoq but DPU fell by 0.8%, mainly as a result of the dilution from the placement of 70m units in April and additional cash in the balance sheet. Occupancy for the quarter continued to remain at a respectable 100% level. Property valuation was also up slightly by S$6.7m, with the cap rate unchanged at 6.5-7%.

Tap on AEI for growth

Looking ahead, with asset prices on the high end, we believe the possibility of acquiring assets within Singapore would continue to remain challenged. As a result, management has highlighted that it will focus on seeking acquisitions in Penang, the Klang Valley and China, and to a lesser preference, Iskandar. With gearing currently at 29.1%, Cache will have debt headroom of S$117m for future acquisitions before gearing reaches 40%.

Maintain Add

We expect Cache’s management to take advantage of the low interest rate environment for early refinancing of the S$187.5m loan due in 2HFY15. In addition, we remain confident that Cache will be able to renew the majority of the 34% of leases that will fall due in FY15, whether through a master lease or underlying tenants before they expire. We maintain our Add rating with an unchanged DDM-based target price of S$1.33.