Cache Logistics Trust’s Latest Earnings: Higher Revenue Achieved But Distribution Falls

Cache Logistics Trust  (SGX: K2LU)  released its fiscal third-quarter earnings (for the three months ended 30 September 2016) last Friday evening.

As a quick background, Cache Logistics Trust is a real estate investment trust that focuses on logistics properties. It currently has19 logistics warehouse properties in its portfolio. These properties, which are located in established logistics clusters in Singapore, Australia, and China, have a total gross floor area of 7.5 million square feet and value of S$1.27 billion as at 30 September 2016.

Financial highlights

Here’s a rundown on some of Cache Logistics Trust’s latest financial figures:

  1. Gross revenue had advanced by 21.2% to S$28.0 million in the reporting quarter on a year-on-year basis. The increase can be attributed to incremental revenue from three property acquisitions made in Australia (in the fourth-quarter in 2015) and the DHL Supply Chain Advanced Regional Centre in Singapore. These were partially offset by lower income from 51 Alps Avenue.
  2. Consequently, net property income (NPI) climbed by 17.5% to S$22.1 million.
  3. However, the REIT’s distribution per unit (DPU) had declined by 13.7% instead, mainly due to the occurrence of a one-time capital distribution from the sale of Kim Heng Warehouse in the third-quarter of 2015.
  4. The REIT ended the quarter with a net asset value per unit of S$0.83, down 14% from the S$0.969 seen a year ago.
  5. As of 30 September 2016, Cache’s aggregate leverage ratio stood at 41.2%, a notable rise from the self-same figure of 38.3% seen a year ago. It is worth noting that REITs in Singapore have a regulatory gearing limit of 45%.
  6. Also, the REIT’s all-in financing cost had increased from 3.40% to 3.62%; its total borrowings had stepped up from S$492.4 million to S$532.7 million; and its weighted average debt maturity had declined from 3.3 years to 2.4 years. The good thing is Cache Logistics Trust’s interest cover ratio had remained constant at 4.1 times.
  7. As of 30 September 2016, Cache Logistics Trust has no debt due until October 2017. 42.9% of the REIT’s total borrowings will come due in 2018, so the REIT’s progress in refinancing its debt is something investors may want to keep an eye on.

Business highlights

Cache Logistics Trust ended the reporting quarter with an occupancy level of 96.5%, a slight increase from the selfsame figure of 95.2% achieved a year ago.

In addition, the REIT reported a weighted average lease to expiry (“WALE”) of 4.0 years. Nearly half of Cache Logistics Trust’s leases (by net lettable area) would expire from 2020 and beyond.

In the earnings release, Cache Logistics Trust gave some insights on the outlook for its market:

“According to Knight Frank, with softened demand and a strong pipeline supply of industrial space in the market, industrial rents [in Singapore] are expected to fall further.”

Daniel Cerf, the chief executive of Cache Logistics Trust’s manager, added:

“Notwithstanding uncertainties in the global economy and the significant supply of industrial space in Singapore, the Manager will continue to focus on proactive asset management, portfolio rebalancing and prudent capital management. In Australia, the longer WALE for Cache’s Australian portfolio, which averages approximately 6.4 years, will enable Cache to ride on the longer term growth in the country.”

Based on Cache Logistics Trust’s last traded price of S$0.88 on Friday, the REIT is valued at 1.06 times its latest book value.

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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.