What Has Changed in Cache Logistics Trust’s Latest Quarter?

Cache Logistics Trust (SGX: K2LU) is a real estate investment trust (REIT) that focuses on the logistics sector in China and Singapore. It is sponsored by CWT Limited (SGX: C14), one of the largest logistics and supply chain solutions provider in Asia. The trust currently has 13 properties with a value of more than S$1 billion.

Cache Logistics Trust is managed by ARA Asset Management (SGX: D1R), a professional real asset fund management company listed here in Singapore.

What is new for this quarter?

Just yesterday, the REIT had announced its first quarter results. So, let’s take a look at how it did. Simply said, the word ‘mixed’ could be appropriate to describe Cache Logistics Trust’s results.

Its quarterly gross revenue had increased by 8.2% year-on-year to S$20.68 million. Together with the growth in revenue, the REIT’s distributable income had also increased by 5.5% from a year ago, ending at S$16.65million. However, due to an increase in the number of outstanding units, distributions per unit failed to grow and instead, decreased by 4.2% to 2.14 Singapore cents. The dilutive increase in unit count was mainly due to the issuance of 70 million new units on 27 March 2013 for a private placement deal.

Cache Logistics Trust ended the quarter with a net asset value of S$0.98, unchanged from the last quarter. Aggregate leverage stayed below its target range of 30% – 40%, coming in only at 29.1%. While it’s nice to see the REIT having a relatively low debt load, it’s worth pointing out that its loans have a very short average term to maturity of only 1.6 years; it will be interesting to see if Cache Logistics Trust will be able to maintain the interest rates it is paying after it refinances its debts over the next two years.

Growth story

Cache Logistics Trust has gone into the Build-to-Suit space in search of growth. It has been awarded a contract to build DHL Singapore’s Asia Pacific Headquarters. The whole project will cost around S$105million and is expected to be completed in the second half of 2015. Once the project’s completed, it will add about 8.6% in property value to the trust.

During the earnings release, Cache Logistics Trust also pointed out that the industry outlook for the logistics sector is not promising. In particular, rental rates in premium warehouses had declined for the first quarter of 2014. Furthermore, a record number of warehouse completions are expected in Singapore; this might create an issue of oversupply of logistics space here. If that comes to pass, it might not bode well for Cache Logistics Trust.

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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 Stanley Lim doesn’t own shares in any companies mentioned.