cache 020611 buy dbsv

8/6/2019 Cache 020611 Buy DBSV

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www.dbsvickers.com

Refer to important disclosures at the end of this reported: MY / sa: YM

BUY S$0.94 STI : 3,172.87

Price Target : 12-Month S$ 1.11

Reason for Report : Company update

Potential Catalyst: Acquisitions

AnalystDerek TAN CPA +65 6398 [email protected]

LOCK Mun Yee +65 6398 7972

[email protected]

Price Relative

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0 . 8 5

0 . 9 0

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A p r - 1 0 S e p - 1 0 F e b - 1 1

S $

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R e l a t i v e I n d e x

C a c h e L o g i s t i c s T ru st ( L H S ) R e l a ti v e ST I I N D E X (R H S)

Forecasts and Valuation

FY Dec (S$ m) 2010A* 2011F 2012F 2013F

Gross Revenue 42 64 69 70Net Property Inc 41 63 67 68Total Return 62 46 50 50Distribution Inc 35 51 55 55EPU (S cts) 4.9 7.3 7.8 7.8EPU Gth (%) N/A 47 7 0DPU (S cts) 5.6 8.0 8.5 8.5DPU Gth (%) N/A 43 7 0NAV per shr (S cts) 90.7 89.4 88.0 86.7PE (X) 19.1 12.9 12.1 12.1Distribution Yield (%) 6.0 8.5 9.1 9.1P/NAV (x) 1.0 1.1 1.1 1.1

Aggregate Leverage (%) 23.2 32.9 33.4 34.0ROAE (%) 10.8 8.1 8.8 8.9

Distn. Inc Chng (%): - - -Consensus DPU (S cts): 8.1 8.4 8.9Other Broker Recs: B: 5 S: 0 H: 0* From listing date in Apr’10ICB Industry : FinancialsICB Sector: Real Estate Investment Trusts Principal Business: CLT is a REIT which invest primarity in industrialassets located in the Pan Pacific region

Source of all data: Company, DBS Vickers, Bloomberg

At A Glance Issued Capital (m shrs) 636 Mkt. Cap (S$m/US$m) 598 / 482 Major Shareholders

CWT Ltd (%) 12.2 Capital Research (%) 6.5 Capital Group (%) 6.0

Free Float (%) 57.9 Avg. Daily Vol.(‘000) 1,402

DBS Group Research . Equity 2 Jun 2011

Singapore Company Focus

Cache Logistics TrustBloomberg: CACHE SP | Reuters: CALT.SI

Tapping sponsor’s pipeline • Acquiring Chemical warehouse from sponsor, CWT

Limited in Shanghai

• 8.6% yield is earnings accretive; long-term leasearrangement ensures strong earnings visibility

• BUY call, TP S$1.11 maintained

Acquire Chemical warehouse facility in Shanghai @8.6% NPI yield from CWT Limited. Cache Logistics Trust(“Cache”) announced that the trust would be acquiring achemical warehouse facility in Jinshan district, Shanghai fromits sponsor, CWT Limited for a total consideration of RMB76m or S$14.6m (including attributable professional,acquisition fees). The property is located in ShanghaiChemical Industrial Park (“SCIP”), an established and also oneof the largest petrochemical bases in Asia.

Accretive deal; strong earnings visibility from long-termlease arrangement. Initial yield of 8.6% is accretive andcompares favourably against its implied trading yield of 7.2%and above recent transactions completed in Singapore (at

8.0% yield). Vendor CWT Limited will lease back the propertyat a net rent of RMB1.30/day for the next 3 years with anoption to renew for an additional 3 years, with annualescalations of 2.0%, ensuring a stable step-up growth profilefor Cache in the medium term. Cache is expected to fund theacquisition through debt and raise its gearing level slightly to29.2% (from 27.9% previously).

BUY, TP S$1.11 maintained. We maintain our estimates aswe have assumed acquisitions in our forecasts. The managerremains keen to grow its portfolio and continues to seeacquisition possibilities in Singapore & Asia, on top of itspipeline of assets from sponsor CWT Limited. The stock

remains attractive for its above consensus FY11-12F yield 8.6-9.2%, which is 260-590 bps above the peers.



Company Focus

Cache Logistics Trust

Income Statement (S$ m) FY Dec 2010A 2011F 2012F 2013F

Gross revenue 42 64 69 70

Property expenses (1) (1) (1) (2)

Net Property Income 41 63 67 68Other Operating (4) (6) (6) (6)

Other Non Opg (Exp)/Inc 0 0 0 0

Net Interest (Exp)/Inc (6) (10) (12) (12)

Exceptional Gain/(Loss) 0 0 0 0

Net Income 31 46 50 50Tax 0 0 0 0

Minority Interest 0 0 0 0

Preference Dividend 0 0 0 0

Net Income After Tax 31 46 50 50

Total Return 62 46 50 50

Non-tax deductible Items (27) 5 5 5

Net Inc available for Dist. 35 51 55 55

Growth & RatioRevenue Gth (%) N/A 51.4 7.0 1.5

N Property Inc Gth (%) N/A 52.2 7.0 0.8

Net Inc Gth (%) N/A 48.2 7.7 0.6

Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0

Net Prop Inc Margins (%) 97.4 98.0 98.0 97.3

Net Income Margins (%) 73.5 71.9 72.4 71.8

Dist to revenue (%) 83.5 79.2 79.6 78.9

Managers & Trustee’sfees to sales %)

9.7 9.8 8.7 8.6

ROAE (%) 10.8 8.1 8.8 8.9

ROA (%) 8.3 5.8 5.8 5.9

ROCE (%) 9.9 7.1 7.2 7.3

Int. Cover (x) 6.2 5.4 5.3 5.2

Source: Company, DBS Vickers

Margins Trend

0

10

20

30

40

5060

70

80

90

100

2010F 2011F 2012F

S$m

92.6

94.6

96.6

98.6

100.6

102.6

104.6

106.6

Net Property IncomeNet Property IncomeMargin%

Contribution from (i) 1.5%rental income growth frommaster lease arrangement;

(ii) contribution fromacquisitions



Company Focus


Balance Sheet (S$ m) FY Dec 2010A 2011F 2012F 2013F

Investment Properties 744 845 846 846

Other LT Assets 0 0 0 0

Cash & ST Invts 8 8 7 7

Inventory 0 0 0 0 Debtors 0 1 1 1

Other Current Assets 0 0 0 0

Total Assets 752 854 854 854

ST Debt 0 100 100 100

Other Current Liabilities 3 4 5 5

LT Debt 173 178 183 188

Other LT Liabilities 1 1 1 1

Unit holders’ funds 575 570 566 561

Minority Interests 0 0 0 0

Total Funds & Liabilities 752 854 854 854

Non-Cash Wkg. Capital (3) (3) (4) (4)

Net Cash/(Debt) (165) (270) (275) (281)

RatioCurrent Ratio (x) 2.6 0.1 0.1 0.1

Quick Ratio (x) 2.6 0.1 0.1 0.1

Aggregate Leverage (%) 23.2 32.9 33.4 34.0

Z-Score (X) 2.1 1.4 1.4 NA

Cash Flow Statement (S$ m) FY Dec 2010A 2011F 2012F 2013F

Pre-Tax Income 31 46 50 50

Dep. & Amort. 0 0 0 0

Tax Paid 0 0 0 0

Associates &JV Inc/(Loss) 0 0 0 0

Chg in Wkg.Cap. 3 0 0 0

Other Operating CF 0 0 0 0

Net Operating CF 34 47 50 50

Net Invt in Properties (713) (101) (1) (1)

Other Invts (net) 0 0 0 0

Invts in Assoc. & JV 0 0 0 0

Div from Assoc. & JVs 0 0 0 0

Other Investing CF 0 0 0 0

Net Investing CF (713) (101) (1) (1)

Distribution Paid (35) (51) (55) (55)

Chg in Gross Debt 178 105 5 5

New units issued 536 0 0 0

Other Financing CF 1 0 0 0

Net Financing CF 680 54 (50) (50)

Currency Adjustments 0 0 0 0

Chg in Cash 1 0 0 0

Operating CFPS (S cts) 4.9 7.3 7.8 7.8

Free CFPS (S cts) (107.2) (8.5) 7.7 7.7


Aggregate Leverage

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2010F 2011F 2012F

Distribution Paid / Net Operating CF

0.4

0.5

0.6

0.7

0.8

0.9

1.0

1.1

2010F 2011F 2012F

Current at 29.2%, we havefurther assumed acquisitions inour numbers



Company Focus


Quarterly / Interim Income Statement (S$ m)

FY Dec 2Q2010 3Q2010 4Q2010 1Q2011

Gross revenue 13 15 15 15

Property expenses 0 0 0 0

Net Property Income 13 14 14 14Other Operating (1) (1) (1) (2)

Other Non Opg (Exp)/Inc 0 0 0 0Net Interest (Exp)/Inc (2) (2) (2) (2)

Exceptional Gain/(Loss) 0 0 0 0

Net Income 9 11 11 11

Tax 0 0 0 0

Minority Interest 0 0 0 0Net Income after Tax 9 11 11 11

Total Return 26 22 14 11

Non-tax deductible Items (15) (10) (1) 2

Net Inc available for Dist. 11 12 12 12

Growth & RatioRevenue Gth (%) N/A 14 0 0

N Property Inc Gth (%) N/A 14 0 0

Net Inc Gth (%) N/A 18 0 (2)Net Prop Inc Margin (%) 97.7 97.4 97.3 97.4

Dist. Payout Ratio (%) 100.0 100.0 100.0 100.0

Margins Trend

11

12

13

14

15

2 Q 1 0

3 Q 1 0

4 Q 1 0

1 Q 1 1

97.1%

97.2%

97.3%

97.4%

97.5%

97.6%

97.7%

97.8%

Net Property Income Net Property Income Margin %


Stable, transparent earningsprofile given master-leaserental income structure



Company Focus


DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

Share price appreciation + dividends

DBS Vickers Research is available on the following electronic platforms: DBS Vickers (www.dbsvresearch.com); Thomson(www.thomson.com/financial); Factset (www.factset.com); Reuters (www.rbr.reuters.com); Capital IQ (www.capitaliq.com) and Bloomberg(DBSR GO). For access, please contact your DBSV salesperson.

GENERAL DISCLOSURE/DISCLAIMER

This report is published by DBS Vickers Research (Singapore) Pte Ltd ("DBSVR"), a direct wholly-owned subsidiary of DBS Vickers Securities(Singapore) Pte Ltd ("DBSVS") and an indirect wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report isintended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by anymeans or (ii) redistributed without the prior written consent of DBSVR.

The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers toDBSVR, DBSVS, and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressedare subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this documentdoes not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This documentis for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtainseparate independent legal or financial advice. DBSVR accepts no liability whatsoever for any direct, indirect and/or consequential loss(including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given inrelation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is awholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time totime have interests in the securities mentioned in this document. DBSVR, DBSVS, DBS Bank Ltd and their associates, their directors, and/oremployees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking,

investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and therecan be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or r iskassessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete orcondensed and it may not contain all material information concerning the company (or companies) referred to in this report.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates andassumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates onwhich the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly fromactual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TOBE RELIED UPON as a representation and/or warranty by DBSVR, DBSVS and/or DBSVH (and/or any persons associated with the aforesaidentities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating tothe commodity referred to in this report.

DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or researchdepartment, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any USpersons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in anysecurity discussed in this document should contact DBSVUSA exclusively.

ANALYST CERTIFICATIONThe research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about thecompanies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/hercompensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 Jun 2011,the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securitiesrecommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).



Company Focus


COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. DBS Vickers Securities (Singapore) Pte Ltd and its subsidiaries do not have a proprietary position in the company mentioned asof 31-May-2011

2. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, beneficially own a total of 1% or more of any class of common equity securities of the Cache Logistics Trust as of2 Jun 2011.

3. Compensation for investment banking services:

i. DBSVR, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA have received compensation, within the past 12 months,and within the next 3 months receive or intends to seek compensation for investment banking services from the CacheLogistics Trust.

ii. DBSVUSA does not have its own investment banking or research department, nor has it participated in any investmentbanking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain furtherinformation, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussedin this document should contact DBSVUSA exclusively.

RESTRICTIONS ON DISTRIBUTION

General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident

of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or usewould be contrary to law or regulation.

Australia This report is being distributed in Australia by DBSVR and DBSVS, which are exempted from the requirement to holdan Australian financial services licence under the Corporation Act 2001 [“CA] in respect of financial services providedto the recipients. DBSVR and DBSVS are regulated by the Monetary Authority of Singapore [“MAS”] under the lawsof Singapore, which differ from Australian laws. Distribution of this report is intended only for “wholesale investors”within the meaning of the CA.

Hong Kong This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated bythe Hong Kong Securities and Futures Commission.

Singapore This report is being distributed in Singapore by DBSVR, which holds a Financial Adviser’s licence and is regulated bythe MAS. This report may additionally be distributed in Singapore by DBSVS (Company Regn. No. 198600294G),which is an Exempt Financial Adviser as defined under the Financial Advisers Act. Any research report produced by a

foreign DBS Vickers entity, analyst or affiliate is distributed in Singapore only to “Institutional Investors”, “ExpertInvestors” or “Accredited Investors” as defined in the Securities and Futures Act, Chap. 289 of Singapore. Anydistribution of research reports published by a foreign-related corporation of DBSVR/DBSVS to “Accredited Investors”is provided pursuant to the approval by MAS of research distribution arrangements under Paragraph 11 of the FirstSchedule to the FAA.

United Kingdom This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in themeaning of the Financial Services and Markets Act and is regulated by The Financial Services Authority. Researchdistributed in the UK is intended only for institutional clients.

Dubai/

United ArabEmirates

This report is being distributed in Dubai/United Arab Emirates by DBS Bank Ltd, Dubai (PO Box 506538, 3rd

Floor,Building 3, Gate Precinct, DIFC, Dubai, United Arab Emirates) and is intended only for clients who meet the DFSAregulatory criteria to be a Professional Client. It should not be relied upon by or distributed to Retail Clients. DBSBank Ltd, Dubai is regulated by the Dubai Financial Services Authority.

United States Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. personexcept in compliance with any applicable U.S. laws and regulations.

Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only forqualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such

jurisdictions.

DBS Vickers Research (Singapore) Pte Ltd – 8 Cross Street, #02-01 PWC Building, Singapore 048424Tel. 65-6533 9688

Company Regn. No. 198600295W

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