Wednesday, 22 January 2014

Result Review - Cache and FCT

Cache Logistics Trust: As Steady As Ever
FY13 DPU increased 3.3%
Portfolio metrics remained robust
Continued focus on growth

4Q13 results within expectations
Cache Logistics Trust (CACHE) announced its 4Q13 results last evening. Gross revenue
rose by 8.2% YoY to S$20.7m, while NPI saw an increase of 7.1% to S$19.6m. The growth
was due to contribution from acquisition of Precise Two and built-in rental escalation
within the portfolio. Distributable income registered a stronger 9.6% growth to S$16.6m on lower financing costs. However, DPU eased marginally by 0.8% to 2.137 S cents as a result of an enlarged unit base. Nonetheless, FY13 DPU still raked up a 3.3% growth to 8.644 S cents. 

Maintaining its strong form
CACHE continued to maintain a 100% occupancy rate for its portfolio and healthy weighted average lease to expiry of 3.1 years (3.4 years in 3Q). For 2014, only 3% of its GFA are due for renewal, thus giving CACHE strong earnings stability. Management also revealed that CACHE is currently in advanced negotiations with its Sponsor and end-users for the lease renewals coming in 2015 (34% of portfolio GFA), which we view positively in light of the upcoming supply of warehousespace. In the area of capital management,we understand that CACHE is still discussing with banks on the refinancing of its maturing debts in 2015. Aggregate leverage stood at 29.2%, unchanged from that seen in 3Q, while all-in financing costs improved to
3.48% in FY13 from 3.82% in FY12. In addition, 70% of interest exposure is hedged, thereby reducing the uncertainty over its funding costs. On the acquisition front, CACHE shared that Singapore, China and Malaysia continue to be its key markets, but did not shed any details on the timeline or specific assets.Management also reiterated that it will seek redevelopment opportunities and built-to-suit projects. 

Frasers Centrepoint Trust: Turning to acquisition for growth
1QFY14 DPU up 4.2% YoY
Bigger malls continued to perform
Possible acquisition in 2014

Frasers Centrepoint Trust (FCT) released its 1QFY14 results last evening, with no surprises on its performance. NPI grew by 4.4% YoY to S$28.3m, while distributable income rose by 4.0% to S$22.7m due to improvement in revenue from Causeway Point (CWP) upon completion of its addition and alteration (A&A) works. About S$2.1m or 0.25 S cents in cash was retained for the quarter, similar to that in 1QFY13. As such, DPU increased by 4.2% to 2.50 S cents. 

Portfolio stable despite movements within assets

CWP continued to shine in 1Q, turning in a robust 8.6% growth in NPI to S$14.1m. Northpoint also registered a 1.4% growth to S$8.8m. In addition, both malls saw robust rental reversions of 7.3%-15.4%, while occupancy rates were kept at high levels of 98.5%-99.1%. As management has previously guided, occupancy rate at YewTee Point improved by 4.4ppt QoQ to 97.1% as new tenants started their leases during the quarter. However, its portfolio performance was somewhat dampened by Bedok Point, which saw negative reversions of 16.0% and occupancy dropped from 96.7% in the preceding quarter to 80.2% due to on-going fitting of incoming tenants and impending A&A works at the basement.

Looking Forward

Going forward, FCT disclosed that it will continue to fine-tune the tenant mix at Bedok Point, and is willing to lower rents to keep incumbents and entice new tenants for sustainable performance. Hence, pressure on base rents and fluctuations in occupancies (possibly within 80%-95% range) are expected going forward. However, management maintains that CWP and Northpoint are likely to continue to deliver in FY14, as higher secured rentals are expected upon lease renewal. With the completion of the A&A works at CWP, FCT is also looking to acquisitions to boost growth. The strata title division of One@Changi City is on target for completion, and an acquisition of Changi City Point may happen in 2014.


I am vested in both Reits and intend to hold. 
CACHE should be able to deliver stable results as shown by its earning visibility, although industrial Reits are not as popular now as before.
I am most interested to see FCT's next move, which is likely to be the acquisition of Changi City Point, which will boost its growth prospectus. I believe there are more assets in the pipeline from its sponsors in the next few years to come. FCT has been achieving DPU growth every year since IPO.  

1 comment:

  1. Both the Reits seems quite strong.

    Happy 2014 New Year!!

    I would like to take up this chance to link up with you.
    As a gesture of good faith, I will add you to my blogroll first. Hope to see my blog in your site as well. Thanks in advance!!

    Dave (


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