Singapore | REITs

Asia Pacific Equity Research

CACHE LOGISTICS TRUST | BUY

MARKET CAP: USD 578.8M AVG DAILY TURNOVER: USD 0.8M 2 Jul 2012 Company Update

BEEFING UP MARKET POSITION

Approval on proposed acquisition Enhanced debt profile Valuation remains attractive

BUY (maintain)
Fair value add: 12m dividend forecast versus: Current price 12m total return forecast S$1.18 S$0.08 S$1.05 20%

Addition of another quality asset Cache Logistics Trust (CACHE) had received approval from unitholders pertaining to the proposed acquisition of Pandan Logistics Hub and the entry of a master lease agreement with CWT Limited. With the addition of this prime logistics property, CACHE will have 12 quality assets under management (eight with ramp-up features) and an enlarged GFA of ~4.83m sq ft (+7.3%). As a note, Pandan Logistics Hub is expected to contribute S$5.2m in rental income to the REIT in the first year, translating to an initial NPI yield of 7.6%. This is likely to add ~0.28 S cents to its DPU on an annualized basis, based on our estimates. Refinancing on more favourable terms CACHE also embarked on a capital management exercise to increase the amount and duration of its debt facility, consistent with our expectations communicated in our 11 Jun report. According to the May 2012 circular to unitholders, a new bank facility of S$375.0m will be used to retire its existing bank facility of S$203.0m and repay its S$40m unsecured loan, while an projected S$79.6m (including S$11.0m refinancing costs) is expected to be used to finance the Pandan Logistics Hub acquisition. Notably, the effective interest rate for the new bank facility is 2.8% plus SOR, which is at 30bps below its existing rate of 3.1% plus SOR. Hence, CACHE is likely to gain from interest savings going forward. Retain BUY with higher fair value of S$1.18 We continue to like CACHE for its resilient portfolio (100% occupied; master lease arrangements), healthy financial position and attractive FY12F DPU yield of 7.9%. We now incorporate the acquisition of Pandan Logistics Hub into our model as the transaction is expected to complete by 9 Jul. We also tweak our estimates to reflect a marginally lower cost of debt. Accordingly, our fair value is raised from S$1.11 to S$1.18. Reiterate BUY on CACHE.

Analysts Kevin Tan (Lead) +65 6531 9810 KevinTan@ocbc-research.com Eli Lee +65 6531 9112 EliLee@ocbc-research.com

Key information Market cap. (m) Avg daily turnover (m) Avg daily vol. (m) 52-wk range (S$) Free float (%) Shares o/s. (m) Exchange BBRG ticker Reuters ticker ISIN code GICS Sector GICS Industry Top shareholder S$734.9 / USD578.8 S$1.0 / USD0.8 1.0 0.915 - 1.06 81.6 699.9 SGX CACHE SP CALT.SI K2LU Financials REITs CWT - 10.1% 1m 2 0 3m 5 8 12m 19 22

Relative total return Company (%) STI-adjusted (%) Price performance chart
Shar e Pr i ce (S$ ) 1.35 1.22 1.08 0.95 0.81 0.68 Jul-11 Oct-11 Jan-12
`

Index Level 4500 4040 3580 3120 2660 2200 Apr -12

Fair Value
Sources: Bloomberg, OIR estimates

CACHE SP

FSSTI

Key financial highlights Year Ended 31 Dec (S$ m) Gross revenue Total property expenses Net property income Income available for distribution DPU per share (S cents) Cons. DPU (S cents) PER (x) P/NAV (x) ROE (%) Gearing (%) FY10 42.4 -1.1 41.4 35.4 5.6 na 10.7 1.2 21.6 23.0 FY11 64.6 -2.7 61.9 52.5 8.2 na 9.6 1.1 11.9 29.1 FY12F 72.1 -3.4 68.7 57.0 8.3 8.2 14.4 1.1 8.1 32.0 FY13F 77.1 -3.3 73.9 60.9 8.6 8.6 13.4 1.1 8.5 32.5

Industry-relative metrics
P er c ent i l e 0t h 25t h 50t h 75t h 100t h

M k t Cap B et a ROE PE PB

Company

I ndust r y A v er age

Note: Industry universe defined as companies under identical GICS classification listed on the same exchange. Sources: Bloomberg, OIR estimates

Please refer to important disclosures at the back of this document.

MICA (P) 035/06/2012

OCBC Investment Research Singapore Equities

Exhibit 1: Details on proposed acquisition

Source: Company

Exhibit 2: Rationale for acquisition

Source: Company

OCBC Investment Research Singapore Equities

Company financial highlights

Income statement Year Ended 31 Dec (S$ m) Gross revenue Total property expenses Net property income Net financing costs Manager's management fees Trustee' Fees Net income Total return after tax Net effect of non-taxable items Income available for distribution

FY10 42.4 -1.1 41.4 -6.1 -3.3 -0.7 31.2 62.0 -26.6 35.4

FY11 64.6 -2.7 61.9 -8.9 -5.0 -1.5 46.5 69.8 -17.3 52.5

FY12F 72.1 -3.4 68.7 -11.9 -6.1 -1.2 49.5 50.3 6.7 57.0

FY13F 77.1 -3.3 73.9 -12.8 -6.1 -1.3 53.7 55.6 5.3 60.9

Balance sheet As at 31 Dec (S$ m) Investment properties Properties under development Cash Total current assets Total assets Current liabilities ex debt Debt Total liabilities Unitholders' funds Total equity and liabilities

FY10 744.0 0.0 8.0 8.1 752.2 3.1 172.7 177.1 575.1 752.2

FY11 842.8 0.0 12.1 12.3 855.2 6.0 248.9 261.1 594.1 855.2

FY12F 965.6 0.0 12.1 12.2 978.1 5.3 312.9 324.7 653.4 978.1

FY13F 977.6 0.0 14.1 14.2 992.1 5.7 322.9 335.3 656.8 992.1

Cash flow statement Year Ended 31 Dec (S$ m) Net income Adjustments Operating income before working cap chgs Change in working capital Cash generated from operating activities Cashflow from investing activities Cashflow from financing activities Change in cash Cash at beginning of period Cash at end of period

FY10 31.2 8.6 39.8 1.8 41.6 -713.3 679.7 8.0 0.0 8.0

FY11 46.5 12.7 59.2 2.8 62.0 -74.3 16.4 4.1 8.0 12.1

FY12F 49.5 16.4 65.9 -0.6 65.2 -122.0 56.8 0.0 12.1 12.1

FY13F 53.7 17.3 70.9 0.4 71.3 -10.0 -59.3 2.0 12.1 14.1

Key rates & ratios DPU per share (S cents) NAV per share (S cents) PER (x) P/NAV (x) NPI margin (%) Net income margin (%) Gearing (%) DPU yield (%) ROE (%) ROA (%) Sources: Company, OIR forecasts

FY10 5.6 90.6 10.7 1.2 97.4 73.5 23.0 5.3 21.6 16.5

FY11 8.2 93.0 9.6 1.1 95.8 71.9 29.1 7.8 11.9 8.7

FY12F 8.3 92.9 14.4 1.1 95.3 68.6 32.0 7.9 8.1 5.5

FY13F 8.6 92.8 13.4 1.1 95.7 69.6 32.5 8.2 8.5 5.6

Company financial highlights

OCBC Investment Research Singapore Equities

SHAREHOLDING DECLARATION: The analyst/analysts who wrote this report hold NIL shares in the above security.

DISCLAIMER FOR RESEARCH REPORT This report is solely for information and general circulation only and may not be published, circulated, reproduced or distributed in whole or in part to any other person without our written consent. This report should not be construed as an offer or solicitation for the subscription, purchase or sale of the securities mentioned herein. Whilst we have taken all reasonable care to ensure that the information contained in this publication is not untrue or misleading at the time of publication, we cannot guarantee its accuracy or completeness, and you should not act on it without first independently verifying its contents. Any opinion or estimate contained in this report is subject to change without notice. We have not given any consideration to and we have not made any investigation of the investment objectives, financial situation or particular needs of the recipient or any class of persons, and accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of the recipient or any class of persons acting on such information or opinion or estimate. You may wish to seek advice from a financial adviser regarding the suitability of the securities mentioned herein, taking into consideration your investment objectives, financial situation or particular needs, before making a commitment to invest in the securities. OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations together with their respective directors and officers may have or take positions in the securities mentioned in this report and may also perform or seek to perform broking and other investment or securities related services for the corporations whose securities are mentioned in this report as well as other parties generally. Privileged / confidential information may be contained in this document. If you are not the addressee indicated in this document (or responsible for delivery of this message to such person), you may not copy or deliver this message to anyone. Opinions, conclusions and other information in this document that do not relate to the official business of OCBC Investment Research Pte Ltd, OCBC Securities Pte Ltd and their respective connected and associated corporations shall not be understood as neither given nor endorsed.

RATINGS AND RECOMMENDATIONS: - OCBC Investment Researchs (OIR) technical comments and recommendations are short-term and trading oriented. - OIRs fundamental views and ratings (Buy, Hold, Sell) are medium-term calls within a 12-month investment horizon. - As a guide, OIRs BUY rating indicates a total return in excess of 10% given the current price; a HOLD trading indicates total returns within +/-10% range; a SELL rating indicates total returns less than -10%. - For companies with less than S$150m market capitalization, OIRs BUY rating indicates a total return in excess of 30%; a HOLD trading indicates total returns within a +/-30% range; a SELL rating indicates total returns less than -30%.

Co.Reg.no.: 198301152E Carmen Lee Head of Research For OCBC Investment Research Pte Ltd

Published by OCBC Investment Research Pte Ltd

Important disclosures