Cambridge Industrial Trust Grows Its Distributions: What Investors Need To Know

Cambridge Industrial Trust (SGX: J91U), which owns 48 properties located all over Singapore worth a total of S$1.3 billion, released its first quarter results on Wednesday. The trust’s properties include those used for logistics, warehousing, light industrial, general industrial, and car showroom and workshop purposes.

For the three months ended 31 March 2014, Cambridge Industrial Trust’s gross revenue dipped 5.1% year-on-year to S$23.5 million while net property income decreased by 11.1% to S$19 million. The trust’s distributable earnings, however, increased 3.3% to S$15.6 million and this led to a corresponding 1.4% increase in distribution per unit (DPU) to 1.251 Singapore cents. In the previous year, DPU was at 1.234 Singapore cents.

The trust’s decline in gross revenue was mainly due to “straight line rent adjustment of S$0.9 million in the prior period and the effect of property divestments net of property acquisitions, completion of developed properties and rental escalations of S$0.4 million”. As the trust had started increasing the mix of multi-tenanted properties in its portfolio since the second quarter of 2013, property-related expenses had increased at a disproportionate rate to gross revenue, leading to the larger drop in net property income.

Meanwhile, its distributable earnings had gone up partly because there was a large 35.5% decrease in non-property-related expenses (which include management fees and interest expenses) to S$6.4 million.

As of 31 March 2014, the gearing ratio of Cambridge Industrial Trust stood at 29.9%, which is a slight increase from the gearing of 28.1% a quarter ago. But despite the increase in gearing, the trust’s net asset value per unit was some 0.1 cents higher at 69.4 Singapore cents

The portfolio occupancy of the trust “remains strong” at 97.0% and the properties have a weighted average lease expiry of 3.6 years.

During the first quarter, the trust had completed the acquisitions of 30 Teban Gardens Crescent and 11 Chang Charn Road for a total of S$73 million. These two properties will start making contributions to the trust’s results from the second quarter onwards. The former property is leased to EuroSports Auto Pte Ltd for six years. The trust had also divested a property, 81 Defu Lane 10, for S$7.8 million.

Asset enhancement initiatives (AEI) are currently being undertaken for three properties at 3 Pioneer Sector 3, 21B Senoko Loop and 31 Changi South Avenue 2. AEIs for the first property is expected to be fully completed by the third quarter this year while the improvement works for the other two properties are expected to be done by the last quarter.

The trust last closed at a price of S$0.725 per unit on Wednesday, giving it a price-to-book ratio of 1 and a distribution yield of 7%.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Sudhan P doesn’t own shares in any companies mentioned.