Cache Logistics Trust

Cache Logistics Trust ("CLT") is a Singapore-based REIT established principally to invest in income-producing real estate used for logistical purposes in Asia-Pacific. CLT's initial portfolio of properties comprises six high-quality logistics warehouse properties located in Singapore.

The properties under Cache Logistics Trust (CLT) will be leased to CWT Ltd. (CWT) and C&P Holding Pte. Ltd. (C&P) under master lease agreements. The leases will have a weighted average lease expiry (by GFA) of 6.4 years, with locked-in annual rental escalations of 1.5% per annum for the first five years of the initial contracted lease term.

CLT is granted a right of first refusal (ROFR) by CWT and its substantial shareholder, C&P, to acquire logistics properties in the Asia Pacific region owned by or offered to CWT and C&P. It is interesting to note that this is another "listed company"trying to hive off its assets into a REIT/Trust, the other list cos that have walked down the same path includes, Hyflux, Capitaland etc.


CLT does not have a credit rating as yet that limits the maximum allowed gearing to 35%. There is still some room for debt funded acquisition as CLT's post-IPO gearing would be 26%. While management views that 35% gearing as a comfortable level, it is open on getting a credit rating to raise its allowed gearing level to 60% should a suitable acquisition opportunity arise. There is also potential for capital appreciation if the trading environment in Singapore continues to recover and cap rates for industrial properties fall.


Based on forecasts found in CLT's prospectus, its IPO is priced at a DPU yield of 8.7% and 8.8% for FY10F and FY11F respectively. This is higher compared to peers such as Ascendas REIT (AREIT SP) and Mapletree Logistics Trust (MLT SP), which trade at consensus yields of 6.9% and 7% respectively for FY10F. IPO investors will be paying for CLT units at a price-to-book (P/B) ratio of about 1.0 vs. AREIT and MLT units currently trading at P/B ratios of 1.2 and 1.0 respectively.

The IPO is attractively priced with a reasonably attractive yield. Investors would do well to subscribe to this counter. Assume CLT heads towards "yield equalisation of 7%", the fair value of CLT will be $1.09.