CLT – Maybnak Kim Eng

No surprises in 1Q14 results

• 1Q14 results in line with our and consensus forecasts.
  
• Foray into build-to-suit development with DHL Supply Chain is positive. This asset will account for 12% of our total GAV.
  
• Reiterate HOLD with a DDM-derived TP of SGD1.15.
  

1Q14 results in line

CACHE’s 1Q14 revenue grew 8.2% YoY to SGD20.7m on the back of positive rental reversions and the acquisition of Precise Two last April. This underscores a 5.5% YoY increase in distributable income. Recently, its master lease at Kim Heng warehouse was renewed with the existing tenant for another two years. The weighted average lease term to expiry (WALE) of the portfolio is 2.9 years, with 65% of the leases due to expire in 2015-2016. The all-infinancing cost stayed unchanged QoQ at 3.48% with debt maturity of 1.6 years (4Q13: 1.9 years).

Positive on BTS logistics warehouse for DHL

We view CACHE’s foray into build-to-suit (BTS) development with DHL Supply Chain positively as the new asset will generate better yields, increase its total deposited property (by 8.6% to SGD1.17b), lengthen portfolio WALE and reduce the average portfolio building age. This will also reduce its tenant concentration risk on CWT/C&P (sponsor), whose master leases are expiring in 2015-2016, constituting ~65% of portfolio GFA. With the completion of the DHL warehouse (928k sq ft) in 2H15, this gets lowered to ~54% of overall GFA. We understand CACHE won the DHL bid from strong GLC contenders including the Mapletree group of companies, which

is highly commendable. The new BTS development is estimated to account for 12% of our total GAV. We reiterate our HOLD call as an oversupply of warehouse space could put pressure on occupancy rates and industrial rents, not to mention the prevailing costconscious attitude among the industrial players. We also keep our DDM-derived TP unchanged at SGD1.15.