SINGAPORE (June 26): CGS-CIMB Securities is maintaining its “hold” call on Cache Logistics Trust (CLT) with an unchanged target price of 80 cents.
The moves comes on expectations of limited near-term DPU growth despite news of ARA Asset Management’s agreement with CLT’s trust manager, ARA-CWT Trust Management, for the former to gain full ownership of the trust and property managers.
In a Monday report, analyst Lock Mun Yee says she views the consolidation of ownership and decision-making as a positive development for CLT, which would allow the trust to ultimately benefit from a greater alignment of interest and lower renewal risks.
“Over the past 3 years, the trust has embarked on a portfolio rebalancing and growth strategy, particularly in Australia. With a greater alignment of interest with ARA, we believe the trust would continue to be able to tap into ARA’s expanding presence and network in the Asia-Pacific region. In addition, the amalgamated interest in the property manager would also ensure good continuity in the management of CLT’s properties,” elaborates Lock.
Going forward, the analyst expects confirmation of CWT Commodity Hub’s master lease expiry, as well as clarity over the potential impact of conversion into a multi-tenanted building, to lend some stability to CLT’s unit price.
“Management guided that the gross average rental from the underlying leases should yield similar income as the master rent, although we think there may be some shortfall from lower space efficiency and the current vacancy of 14%. It has also reduced lease expiries to 6.7% of portfolio NLA due for the remainder of FY18,” she recalls.
Upside risks to Lock’s view could come from new acquisitions, given CLT’s lower gearing post the divestment of Hi-Speed Logistics Centre, or distribution of its retained rental to-up in relation to Schenker.
See: Cache Logistics says Schenker Megahub dispute settled amicably
On the other hand, Lock remains cautious of downside risks which include slower-than-expected occupation of the vacant space at CWT Commodity Hub.
As at 10:56am, units in CLT are trading 0.7% lower at 76 cents, which implies a Dec-18F dividend yield of 7.87%.
