Cache Logistics Trust’s Latest Second Quarter Results: Steady as It Goes

Cache Logistic Trust

I guess I wouldn’t be too far off the mark with the statement that most investors choose to invest in real estate investment trusts (REITs) mainly for their ability to produce stable income. That is why having no surprises – be it good or bad – can actually be good news; for Cache Logistics Trust’s (SGX: K2LU) latest second quarter results released just yesterday, that’s an apt description.

Cache Logistics Trust is a REIT that focuses on the logistics sector in China and Singapore. It is sponsored by CWT (SGX: C14), one of the largest logistics and supply chain solutions providers in Asia. The trust currently has 13 properties and has a market capitalisation of about S$1 billion.

First-half score

The REIT had been able to grow its revenue for the first half of 2014 by 4.8% year-on-year, ending 30 June 2014 at S$41.5 million. That growth flowed down to the REIT’s distributable income, which gained 2.9% year–on-year to S$33.4 million.

Unfortunately, due to a private placement of 70 million units last year, the REIT’s enlarged unit-holder base had resulted in a 2.1% drop in its distribution per unit to 4.287 cents. With Cache Logistics Trust trading at S$1.24 per unit at Monday’s closing, that is an annualized yield of 6.9%.

Properties and balance sheet

Cache Logistics Trust continues to have a strong asset base with an occupancy rate of 99.6%. Its interest coverage ratio is at 6.5 times, which is still a relatively stable level. The REIT’s gearing ratio is still below 30% at the end of the quarter, signalling a strong balance sheet.

New kids on the block

The main driver of growth for the REIT in the future will likely come from the DHL Supply Chain Advanced Regional Centre which is expected to be completed by the second half of 2015. Upon completion, the building will be one of the most valuable pieces of real estate for the trust; it will boost the gross floor area of the trust by 19.3% and increase its asset value by 11.9%.

Apart from the aforementioned property, the REIT has about 14 properties under its “Rights of First Refusal” agreement with its sponsor, CWT. The trust might consider an acquisition of any of those 14 properties as a way to increase its future revenue.

Foolish Summary

To sum it up, everything is going as planned for Cache Logistics Trust. As they say, no news is good news.

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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.