Cache Logistics Trust’s Third Quarter Earnings: What Investors Need to Know

Cache Logistics Trust (SGX: K2LU) is a real estate investment trust (REIT) that owns 19 logistics warehouse assets located in established logistics clusters in Singapore, Australia and China. CWT Ltd (SGX: C14) is the REIT’s sponsor.

Yesterday, the trust announced its financial results for the third quarter ended 30 September 2017 (3Q2017). The reporting period was from 1 July 2017 to 30 September 2017.

Here’s a quick rundown on the financial figures from the earnings release:

1. Gross revenue for 3Q2017 slipped 2.2% year-on-year to S$27.4 million while net property income (NPI) came down 3.3% to S$21.3 million.

2. Distribution per unit (DPU) tumbled from 1.847 cents in 3Q2016 to 1.541 cents in the latest quarter. The poor showing was mainly due to lower income from operations and an increased number of units due to the recently-completed rights issue.

3. The net asset value per unit was at S$0.769, as of 30 September 2017. This is a slight decrease from S$0.770 seen at the end of June 2017.

The declines in gross revenue and NPI for the quarter were due to the divestment of Cache Changi Districentre 3, lower income from 51 Alps Ave, and conversion of 40 Alps Ave from a triple-net master lease structure to a gross rent lease structure in a weak rental market. Higher contributions from DHL Supply Chain Advanced Regional Centre, Cache Cold Centre and the Australia portfolio helped to offset the declines partially.

As of the end of September 2017, Cache’s portfolio committed occupancy stood at 97.3%, against a market average of 88.1%.

The portfolio weighted average lease to expiry was 3.3 years, and only 1.1% of leases in terms of net lettable area are expiring for the rest of the financial year.

Aggregate leverage ratio for the REIT was at 43.6%, as of 30 September 2017. After the repayment of borrowings on 16 October 2017 using the proceeds from the rights issue, Cache’s aggregate leverage came down to 35.7%. The ratio is well below the regulatory limit of 45%.

The table below summarises the REIT’s capital management:

Source: Cache Logistics Trust’s third quarter earnings presentation

In Singapore, the industrial market “continues to remain challenging due to an oversupply of warehouse space although economic indicators have improved”. A pick-up in leasing demand is expected and vacancy rates should stabilise over time, according to CBRE.

The manager said that it “remains focused on proactive lease and asset management to maintain high occupancy and to optimise portfolio returns”. It added that it will “continue to pursue growth opportunities for strategic acquisitions as part of its portfolio rebalancing strategy to enhance the overall quality of Cache’s portfolio”.

The trust is now going at S$0.845. This gives a historical price-to-book ratio of 1.1 and a trailing yield of 8.3%.

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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 Sudhan P doesn’t own shares in any companies mentioned.