The Cache Logistics Trust is a Singapore-based REIT which will principally invest in income-producing real estate used for logistics purposes in Asia-Pacific, as well as real estate-related assets. For its IPO, CLT will be offering 474,108,000 Units at the price of S$0.88 per Unit. This will raise about S$417 million for the Trust. The IPO proceeds will be used to fund new properties and as working income. The units are expected to be traded on the SGX on 12 April 2010.
The Sponsor
The sponsor for CLT is CWT, also a listed company in SGX. CLT is granted a right of first refusal 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.
Following is the overview of CWT from its website:
"Being the largest listed logistics company in Southeast Asia, CWT offers integrated logistics solutions to some of the world's leading brands in the chemicals, commodities, automotive, marine, oil & gas, defence and industrial sectors. Through its global network, the CWT Group is able to connect customers to 120 ports and 1,200 destinations seamlessly around the world."
The Manager
CLT is managed by ARA-CWT Trust Management (Cache) Limited, a joint-venture REIT management company 60% owned by ARA and 40% owned by CWT. ARA Asset Management is also listed in SGX. Currently it also manages SUNTEC Reit and Fortune Reit.
Initial Portfolio
The initial portfolio consists of 6 properties injected by CWT, namely:
- CWT Commodity Hub
- CWT Cold Hub
- Schenker Megahub
- Hi-Speed Logistics Centre
- C&P Changi Districentre
- Changi Districentre 2
Comparison with other industrial REITs
Following are the Asset Values of the other industrial REITs listed in SGX:
| REIT | Asset Value |
| A-REIT | S$4765M |
| MapletreeLog | S$3035M |
| Cambridge | S$916M |
| AIMSAMPIReit | S$658M |
In terms of asset value, CLT is comparable to Cambridge and AIMSAMPIReit.
Gearing
The initial gearing for CLT is 25.9%.
Comparison with other industrial REITs
The following shows the gearing of the other industrial REITs:
| REIT | Gearing |
| A-REIT | 31.20% |
| MapletreeLog | 38.10% |
| Cambridge | 42.60% |
| AIMSAMPIReit | 28.90% |
CLT will have the lowest gearing among the industrial REITs. Did not find any mention of corporate rating in the prospectus. If that is so, the gearing limit for CLT will be 35%. It needs a corporate rating to gear up to 60%. All the other industrial REITs have a gearing limit of 60%.
Dividend Yield
As indicated in the prospectus, CLT’s distribution policy is to distribute 100% of its income until 31 December 2011, and at least 90% of its income thereafter. The projected yield based on the IPO price of S$0.88 is 8.70% for 2010 and 8.82% for 2011.
Comparison with other industrial REITs
Following are the range of the dividend yield of the other industrial REITs in recent weeks:
| REIT | Yield |
| A-REIT | 6 – 7% |
| MapletreeLog | 6 – 7% |
| Cambridge | 11 – 12% |
| AIMSAMPIReit | 8 – 9% |
From the above, the initial yield for CLT compares favourably with the other industrial REITs. This is especially so if we take gearing into account. The relatively low gearing of CLT means that it has greater flexibility and headroom into funding by debt to increase its DPU and hence the yield. Cambridge Industrial Trust has the highest yield but its gearing is way higher above 40%.
Net Asset Value (NAV)
Based on the Pro Forma balance sheet in pg C-4 of the prospectus, the NAV per unit is S$0.87. The offer price of S$0.88 is almost equal to the NAV per unit.
Comparison with other industrial REITs
Following are the NAV per unit and closing price on 1 Apr 2010 of the other industrial REITs:
| REIT | Closing Price on 1/4/10 | NAV per unit |
| A-REIT | 1.940 | 1.580 |
| MapletreeLog | 0.850 | 0.850 |
| Cambridge | 0.465 | 0.600 |
| AIMSAMPIReit | 0.215 | 0.310 |
Larger REITs like A-REIT and MapletreeLog are trading above or equal to the NAV per unit, while smaller REITs like Cambrige and AIMSAMPIReit are still trading at discount to the NAV per unit. It is hard to tell at this point whether market will pay a premium over the NAV for CLT or otherwise. Based on asset value CLT should belong to the camp of smaller REITs. But it has the advantage of being the lowest in gearing.
Conclusion
Based on the key financial figures and ratio such as yield and gearing, CLT compares well with the other industrial REITs. But we must take note that these comparisons have not looked into the underlying reasons for market to pay a premium or discount to the existing industrial REITs. For example, AIMSAMPIReit has just come out of a big capital restructuring exercise which includes rights issue and change of sponsor and substantial shareholders.
One interesting thing to look out for is the market reaction to the new REIT to be listed after about 2 years. If it is very positive, it may encourage more REITs to be listed. I remember sometime last year it was mentioned in the news that Mapletree may list a commercial REIT which may include Vivocity if the distribution yield of the REITs largely drop to around 5%.
Very good analysis. Thx.
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