Cache Logistics Trust’s DPU Is Not Sustainable
Key Highlights:
Cache Logistics Trust (SGX: K2LU)'s 3Q19 DPU dropped 11%
The annualised yield and price to book ratio are 7.2% and 1.13 respectively
1. Dividends
Net property income fell 8.3% to $21.1m. The poor performance was mainly due to:
The conversion of Cache Gul LogisCentre master lease into multi-tenancies
Downtime at Commodity Hub due to the transition period
Lease expiry at Pandan Logistics Hub, Changi DistriCentre 1 and 41-51 Mills Road,
Weaker AUD
The annualised yield is 7.2%. Both the stock price and DPUs of the REIT has been declining since 2012. This indicates bad fundamentals on the REIT. In the last quarter, the REIT suffers negative rental reversion of 11.9%.
Source: reitscompass's REITs Insider ratings
2. Portfolio
Portfolio occupancy grew slightly to 94%, with 20.6% of net lettable area is up for renewal next year. The portfolio leverage is currently at the healthy side of 38.3%. The interest cost is 3.87%, the good news is downside risk is hedged with 70.1% of the loans are on fixed rates.
It is currently trading at a price to book ratio of 1.13.
3. Growth Catalyst
Cache Logistics Trust's manager continues to look for yield accreditive and freehold assets in Australia and New Zealand to boost performance. The tight supply and strong demand in the countries should help to stabilise its property income moving forward. And the good news is the REIT has hedged 87% of its foreign income to SGD.
On the backdrop of economic headwinds, its Singapore assets' are expected to remain volatile.
Summary
With declining DPUs over the last few years, Cache Logistics Trust does not match our criteria to be included in our portfolio.
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