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Singapore IPOs: Why I No Longer Cover Every Listing

Some readers may have noticed that I have not been writing about every Singapore IPO since last year. The simple reason is that life has become busier. Between my day job, an increasingly packed travel schedule, family commitments and desire to play more golf, I have become much more selective about how I spend my time.  Writing detailed IPO reviews takes time — reading prospectuses, analysing financials, comparing valuations and understanding the competitive landscape. While I still enjoy investing and writing, I no longer feel the need to cover every IPO that comes to market. Instead, going forward, I will probably focus only on IPOs where I am seriously considering investing my own money or where there is something particularly interesting that is worth discussing. I suspect this will make the blog more useful as well. Rather than writing about every deal, I can spend more time sharing my thoughts on the handful that I believe deserve attention. That bring...
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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.
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Anonymous said…
What is your comments for the upcoming MinZhong IPO ?

Thanks
Koi
8 April 2010 at 18:22
Anonymous said…
I would like to know too, your opinion on the Min Zhong IPO. Consumer Products stocks seems to be under watch recently.
Waiting to see its prospectus. Till then.

- Kelvin
8 April 2010 at 23:31
Collin said…
I think Min Zhong might be a hit given the publicity it garnered. (People like to see Temasek/GIC link)

Will be pouring over its prospectus over the weekend.
8 April 2010 at 23:33
hongjun said…
Looks attractive dividend.
9 April 2010 at 00:10
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