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What Investors Need to Know about Cambridge Industrial Trust’s Latest Full-Year Earnings

Cambridge Industrial Trust (SGX: J91U) had announced its full-year results on Friday and this is what investors need to know about it.

The real estate investment trust currently owns a portfolio of 50 properties in Singapore that’s worth a collective S$1.37 billion. These properties are classified under a number of different segments depending on their uses. These segments are namely Logistics, Warehousing, Light industrial, General industrial, and Car showroom & workshop.

Cambridge Industrial Trust’s December acquisition of 16 International Business Park had also marked its first foray into the business park space, thereby further increasing the diversification of its portfolio.

With these as a backdrop, let’s dive into the REIT’s full-year earnings.

Financial performance

For 2014, Cambridge Industrial Trust’s gross revenue inched up 3.0% year-on-year from S$96.5 million to S$99.3 million. However, its net property income for the year dipped by 3.2% “as a result of higher property expenses due to the conversion from single-tenancy to multi-tenancy.”

Meanwhile, the REIT’s distributable earnings managed a slight increase of 2.9% from S$61.28 million to S$63.03 million. Cambridge Industrial Trust’s distribution per unit (DPU) grew by 0.6% to 5.004 cents as a result of increases in both distributable earnings and the unit count.

Financial position

As at 31 December 2014, Cambridge Industrial Trust’s total debt stands at S$480 million, leading to a gearing ratio of 34.8%. These two figures show that the trust’s balance sheet has weakened slightly compared to the third quarter of 2014; back then, Cambridge Industrial had total borrowings of S$458 million and a gearing ratio of 33.9%.

The REIT’s all-in cost of borrowings have also inched up slightly from 3.66% to 3.68%. These trends – the weakening balance sheet and more expensive borrowings – are something for investors to keep an eye out as they can have an adverse impact on the REIT’s distributions and growth potential in the future.

To that point, investors may want to observe how the REIT refinances or repays S$250 million worth of borrowings which will come due by 2016.

Prospects and valuation

Philip Levinson, chief executive of the Manager of Cambridge Industrial Trust, commented on the year’s results as well as some of the REIT’s future plans and outlook:

“This quarter we achieved a significant milestone in the acquisition of our 50th property, which was also our maiden business park asset investment. We took advantage of the low interest rate environment to reduce the cost of our debt through a well subscribed S$100 million MTN issue.

We will continue to explore value-creating acquisition opportunities, proactively manage our high quality Singapore portfolio and deliver value through ongoing asset enhancement initiatives, whilst maintaining a disciplined financial and capital management approach. CIT has a strong platform, supported by a high calibre team, which positions us well to achieve sustainable growth and value for our Unitholders into the future.”

The trust last closed at a price of S$0.685 per unit on Friday, giving it a price-to-book ratio of 1 and a distribution yield of 7.35% (based on its DPU of 5.004 cents for 2014).

Foolish Takeaway

Cambridge Industrial Trust has been proactively acquiring new properties for its portfolio as well as upgrading its existing properties. These moves will yield a higher gross floor area (GFA) available for rental and increase the diversification of the REIT’s tenant-base as single-tenancy properties are converted to multi-tenancy ones.

These moves – if they can result in per unit growth in distributions – will be positive for unit-holders. In any case, investors interested in Cambridge Industrial Trust should also keep a watchful eye on its balance sheet given that we might be in an environment of rising interest rates in the future.

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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 James Yeo doesn’t own shares in any companies mentioned.