Latest Earnings from Cache Logistics Trust: Drop In Distributions Seen

Last Friday, Cache Logistics Trust (SGX: K2LU) released its first-quarter earnings for its fiscal year ending 31 December 2016. The reporting period is from 1 January 2016 to 31 March 2016.

Cache Logistics Trust is a real estate investment trust (REIT) that focuses on industrial properties. It currently has a total of 19 warehouse properties in three countries, namely, Singapore (12), Australia (six), and China (one). The properties have a total value and gross floor area of around S$1.3 billion and 7.51 million square feet.

With that, let’s take a look at how the REIT had done in the first-quarter of 2016. Here are some important highlights from the income statement:

  • For the quarter, gross revenue increased by 32.7% year-on-year to S$27.9 million.
  • As a result of a 342% surge in property expenses, the REIT’s net property income only managed to climb by 12% to S$22.0 million compared to a year ago.
  • Income available for distribution was S$18.2 million, up 8.6% from the S$16.8 million seen in the same period last year. Investors should take note that the income available for distribution for the reporting quarter had included a S$1.65 million capital distribution due to the sale of a warehouse last year.
  • Despite a higher income available for distribution, the REIT’s distributable income dropped by 5% year-on-year to 2.039 Singapore cents. The lower DPU was primarily due to an enlarged unit count.

Cache Logistics Trust’s net property income had increased in the quarter due to contributions from the Australian portfolio and the DHL Supply Chain Advanced Regional Centre. This was offset by higher property expenses that are partly a result of the conversion of master leases to multi-tenanted leases.

The REIT reported a healthy 94.2% occupancy rate at the end of the reporting quarter with a weighted average lease expiry (WALE) of 4.3 years. Over 40% of the REIT’s leases by gross rental income will expire only on 2020 and beyond.

Cache Logistics Trust’s manager had given the following comments in the earnings release on the REIT’s lease renewals:

“Despite the headwinds in the industrial property market, Cache successfully replaced or renewed 22% of the approximately 960,000 sf of space which were due for expiry in FY2016, and secured 134,200 sf of forward lease commitments for lease expires in FY2018”

Moving on to the balance sheet, Cache Logistics Trust’s aggregate leverage at the end of the reporting quarter stood at 39.6%, up from the 36.6% seen in the same quarter a year ago. The average all-in financing cost also increased from 2.77% to 3.69% while the interest cover ratio had declined pretty drastically from 7.7 times to 4.05 times.

On a more positive note, the REIT has no debt refinancing requirements until October 2017.

Cache Logistics Trust’s net asset value (NAV) per unit had decreased from S$0.98 in the first-quarter 2015 to S$0.88 in the reporting quarter.  The decline in the NAV was largely due to dilution, as a result of a private placement exercise carried out by the REIT towards the end of 2015.

Daniel Cerf, the chief executive of the REIT’s manager, had the following thoughts regarding the REIT’s future plans:

“In FY2016, our emphasis remains on maintaining high occupancy in the portfolio with the highest achievable income. We are focusing on our leases which expire in the latter half of FY2016 and extending our portfolio WALE.

Our long-term diversification and growth strategy is yielding results. During the quarter, we received revenue contribution from DHL Supply Chain Advanced Regional Centre, our first successful build-to-suit warehouse. Likewise, our Australian strategy is also paying off with the portfolio there contributing 13.8 per cent of Q1 FY2016 gross revenue. We look to continue to expand our footprint in the country with good quality assets.”

At its closing price of S$0.89 per unit on Friday, Cache Logistics Trust trades at a price-to-book ratio of 1.01 and offers an annualized distribution yield of 9.1%.

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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.