Cache Logistics Trust (SGX: K2LU) is an industrial real estate investment trust listed on the Singapore Exchange with a market capitalization of around S$780 Million.
February 2015 was when Cache Logistics Trust’s love affair with Australian industrial properties started. The REIT had purchased three properties in Australia for A$70 Million back then. To date, the REIT has added another three Australian industrial properties to its portfolio, bringing its total real estate count in the country to six.
The REIT now owns a total of 19 industrial properties – 12 in Singapore, one in China, and six in Australia.
Let’s look at Cache Logistics Trust to see if the REIT is at an attractive price now. We will be analyzing the REIT based on its distribution yield, net asset value (NAV), and debt level.
In the first three quarters of 2015, the REIT has paid out distributions amounting to S$0.06426 per unit. Annualizing this, we’d get a pay out of S$0.08568 per unit, which would mean the REIT offers a distribution yield of 9.7% at its current price of S$0.88.
Cache Logistics Trust has a NAV which stood at S$0.969 as of 30 September 2015. Based on the REIT’s latest price, it is trading at a 9% discount to NAV. This gives investors some margin of safety when buying the REIT.
Coming to debt, the REIT’s total borrowings and total assets stood at S$492.4 million and S$1.28 billion respectively, as of 30 September 2015. This implies a gearing ratio of 38.3%, which is fairly reasonable. The average all in financing cost of the debt the REIT holds is currently at 3.8%.
Also, the REIT has hedged around 65% of debt against interest rate risks. This should give investors some assurance should interest rates rise in the near future.
One thing investors should take note of is that the REIT has a property in Singapore – DHL Supply Chain – which will start receiving rental income only from January 2016 onward. Also, the REIT had entered into a purchase agreement for the sixth property in Australia only in late November 2015. Both of these could potentially allow the REIT to further increase its rental income and thus distributions in the future.
Investors should keep all the above in mind when evaluating the REIT to make an informed decision.
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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 Esjay owns units in Cache Logistics Trust.