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What Investors Should Know About Cache Logistics Trust’s Latest Earnings and Valuation

Cache Logistics Trust (SGX: K2LU), as its name suggests, is a real estate investment trust that focuses on logistics properties. It currently owns 19 logistics warehouse properties that are located in established logistics clusters in Singapore, Australia, and China.

Cache Logistics Trust is managed by ARA-CWT Trust Management (Cache) Limited, a joint-venture between ARA Asset Management and CWT Ltd (SGX: C14). CWT is a logistics services provider that is in the process of being privatised by Chinese conglomerate, HNA Group.

There are two things about Cache Logistics Trust that investors may want to know about right now: Its latest financial performance and valuation.

Financial performance

Here’s a table showing important items from Cache Logistics Trust’s income statement for the second quarters of 2017 and 2016, and the first quarter of 2017:


Source: Cache Logistics Trust 2017 second quarter earnings release

We can see that the REIT’s net property income (NPI) and distribution per unit (DPU) were down by 4% and 9.5%, respectively, on a year-on-year basis in the second quarter of 2017. The weaker performance was due to lower contributions from (1) 51 Alps Ave as a result of an ongoing legal action, (2) Hi-Speed Logistics Centre, Singapore because of the conversion of the master-lease into multi-tenanted leases, and (3) Cache Changi Districentre 3 due to its sale in January 2017.

Daniel Cerf, the chief executive of Cache Logistics Trust’s manager, shared the following comments on the REIT’s performance in its latest earnings:

“We are pleased to see that since embarking on the portfolio rebalancing and growth strategy in 2015, the Australian portfolio has seen an increase in year-to-date NPI by close to 11% compared to a year ago. In addition, our proactive asset management efforts have produced results as the portfolio committed occupancy has improved to 98.3% despite the lingering oversupply of industrial space in Singapore.

We continue to remain focused on our portfolio rebalancing and growth strategy to diversify our earnings and improve our capital structure over time.”

Valuation

There are two useful valuation metrics for assessing REITs. They are the price-to-book (PB) ratio, and the distribution yield.

The table below shows Cache Logistics Trust’s PB ratio and distribution yield. It also shows the respective averages for the two valuation metrics for the 39 REITs that are in Singapore’s stock market.


Source: SGX Stock Facts; data as of 26 September 2017

Although Cache Logistics Trust’s PB ratio is a little higher than the market-average, its distribution yield is significantly better. Thus, the REIT can be said to be trading at a discount to the market.

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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 Lawrence Nga doesn’t own shares in any companies mentioned.

The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.