The first distribution by Cache Logistics Trust since listing

The First Distribution Since Listing
Cache Logistics Trust commenced trading in SGX on 12 APR 2010. In its first and latest quarterly earnings report for Q2 2010, it has announced a DPU of 1.71 cents for the period 12 April 2010 (Listing Date) to 30 June 2010. This DPU will be distributed along with the DPU to be announced for Q3 2010. As mentioned in the Prospectus dated 1 April 2010, the first distribution will be for the period from the Listing Date to 30 September 2010, and will be paid on or before 29 November 2010.

Following is a rough calculation of the expected amount for the first distribution:

• Announced DPU from 12 Apr 2010 to 30 Jun 2010 = 1.71 cents
• Annualized DPU based on the above = 7.81 cents (this figure can be found in the Q2 2010 earnings report)
• DPU per quarter based on above annualized DPU = 7.81/4 = 1.9525 cents
• Estimated first distribution for the period from 12 Apr 2010 to 30 Sep 2010 = 1.71 + 1.9525 = 3.6625 cents

Stock Price Movement
The reit has been trading around 0.90 to 1.00 for the past few months, which is slightly above its IPO price of 0.88 and NAV per unit of 0.87. In Sep 2010, it has momentarily went above 1.00, but in recent weeks it has gradually went down to around 0.970 - 0.975. The weakening of its share price is contrary to the recent strengthening of the STI, which has went solidly above 3000, and is approaching 3200 at the time of this writing. A wild guess for the reason behind the weakening share price is that funds are selling out of this reit to go for the IPOs of Global Logistics Properties and Mapletree Industrial Trust, which are expected to take place in mid october. Like I say this is a wild guess and it is difficult to prove, but I would say it is a logical guess as both are similar in nature to Cache Logistics, but have much stronger parents. Global Logistics Properties is not a reit but it is also in the logistics sector, and its parent is GIC. Mapletree Industrial Trust is not really in the logistics sector (unlike its closely related cousin Mapletree Logistics Trust), but it is also an industrial reit. Its parent is Mapletree Investments Pte Ltd, which is a wholly-owned subsidiary of Temasek Holdings.

Opportunity OR Further Downside?
Let's look at some factors that should make the recent weakening of the share price a good buying opportunity:

• As mentioned above, the estimated DPU of 3.6625 cents is expected to be paid on or before 29 November 2010. The XD (Ex Dividend) should be around Oct to Nov period. At the latest price of around 0.975, this is an absolute return of around 3.756% within one to two months.
• Most of the S-Reits have went up in prices quite significantly recently, such that their dividend yield has gone down to levels around 4-6%. For Cache, based on the annualized DPU of 7.81 cents shown above, and the latest price of around 0.975, its dividend yield is around 8%, which is top among the S-Reits. 
• Its gearing of 25.5% is lower than most of the other S-Reits. It still have a comfortable debt headroom for acquisition, which can potentially boost its dividend yield further.

Of course while we can make logical analysis based on figures in the earnings report, sometimes the market just choose to behave unexpectedly. Cache may have a stagnant share price or even further downside if it is slow to attract buyers, especially institutional investors. This is possible with the competition coming from new counters like Global Logistics Properties and Mapletree Industrial Trust, and also older counters like Cambridge, etc. However, the imminent distribution of 3.6625 cents should be a good buffer against further downside.