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Cambridge Industrial Trust’s Latest Earnings: Where’s The Growth?

Credit: Cambridge Industrial Trust

Cambridge Industrial Trust (SGX: J91U) announced its fiscal first-quarter results yesterday for the three months ended 31 March 2015.

For some quick background, the real estate investment trust owns 50 industrial properties across Singapore. These properties have a total gross floor area of around 8.4 million square feet and are collectively valued at about S$1.39 billion as at 31 March 2015.

Let’s dig into the highlights of the REIT’s latest financials.

The numbers

Cambridge Industrial Trust saw its revenue for the fiscal first-quarter come in at S$27.5 million, up 16.7% from a year ago. This was mainly due to contributions from acquisitions as well as newly-developed properties. .

The higher revenue did not do much for the bottom-line though as Cambridge Industrial Trust ended the quarter with S$15.7 million in distributable amount, up a mere 0.6% from a year ago.

Due to a larger number of units in issue (partly as a result of the REIT using newly-issued units to pay its management fees), the REIT’s distribution per unit (DPU) for the quarter actually fell by 2.1% from 1.251 cents a year ago to 1.225 cents.

Here’s a table showing some of the important metrics that point to the financial health of the REIT:

Cambridge Industrial Trust's balance sheet figures (23 April 2015)

Source: Cambridge Industrial Trust’s earnings release

When compared to a year ago, it’s been a mixed year in terms of changes to the REIT’s financial health.

It’s good to see a decline in the cost of debt (interest rate), an increase in the average debt maturity, and a higher percentage of debt with fixed interest rates. But at the same time, the REIT had increased both its borrowings as well as gearing ratio.

Investors might also want to note that Cambridge Industrial Trust has S$230 million in borrowings (some 45% of total debt) coming due in 2016; the REIT’s progress in refinancing this borrowing might bear some watching.

A REIT’s net asset value (NAV) is a good proxy for its underlying economic value and that’s why it’s a figure investors might want to track. Unfortunately for Cambridge Industrial Trust, it’s NAV per unit of S$0.68 as of 31 March 2015 is a 2% decrease from the selfsame figure of S$0.694 seen a year ago.

Operational highlights

Cambridge Industrial Trust ended the quarter with a portfolio occupancy rate of 95%, down from 97% in the previous year.

In the earnings release, the REIT also mentioned its proposal – first announced on 18 February 2015 – to acquire the property known as 160A Gul Circle, a 86,075 square feet factory priced at S$16.2 million. The trust also has one asset enhancement initiative left on one of its properties at the moment.

In total, Cambridge Industrial Trust will likely spend nearly S$18 million in total for both the acquisition and the AEI.

There’s no indication in the latest earnings release documents on how Cambridge Industrial Trust is planning to fund these activities. However, it seems that the REIT would be able to fund them with borrowings (the REIT still has S$72 million in undrawn committed facilities) and would likely not need to issue new units through either a private placement or a rights issue.

Foolish Summary

At its current price of S$0.72 per unit, Cambridge Industrial Trust is currently providing an annualised distribution yield of 6.8% for its unitholders (based on annualising its first-quarter distribution of 1.225 cents per unit). It is also trading slightly above its book value with a price-to-book ratio of 1.06.

The trust has been successful with growing its revenue for its unitholders. Hopefully, they can translate that top-line growth into stronger distributions per unit in the years to come.

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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.