CLT – DBSV

Awaiting the acquisition kicker

At a Glance

• 4Q10 DPU of 1.95 Scts accounted for 23% of FY estimates

• Completion of recent acquisitions to drive earnings growth in coming quarters

• BUY, TP maintained at S$1.11

Comment on Results

1Q11 results in line. DPU of 1.95 Scts formed 23% of our full year forecast. Cache Logistics Trust (“Cache”) reported topline and net property income (“NPI”) of S$14.8m and S$14.4m respectively, which were slightly below IPO forecasts due to timing differences in revenue recognition for the purchase of its initial properties and pro-rated monthly income. Distributable income of S$12.4m exceeded forecast by 0.2%, largely due to loans obtained at cheaper rates, translating to a DPU of 1.95 Scts (+0.6%).

Proactive asset management. New acquisitions yet to kick in. Management remains proactive in managing its properties – securing additional commitment from an existing tenant at Commodity Hub while embarking on AEI opportunities to boost rental income, albeit marginal increase in income. Recent acquisitions of 6 Changi North Way APC Districentre and 4 Penjuru Lane will underpin earnings growth in the coming quarters.

Lowly leveraged balance sheet; Cache has the firepower to execute on further acquisitions. At a modest 26.4%, Cache remains one of the lowest geared S-REITs. We continue to see acquisitions as potential catalysts given visible pipeline of properties from sponsors CWT and C&P on top of 3rd party opportunities regionally. We have moderated our estimates slightly as we adjusted contributions from new acquisitions to start only from end-2011.

Recommendation

BUY call, TP maintained at S$1.11. Cache remains attractive for its FY11-12F yield of 8.5-9.0%, which is 230-270 bps above peers’ average of 6.0% – 6.3%.