Cache Logistics funds $13m warehouse acquisition through debt

The vendor, Air Market Express, will in turn lease the property back for an initial 5 years, with an option to renew for another 5 years, offering long term income visibility for Cache in the medium term.

The acquisition price also includes the sum paid for the proposed works to convert the current open roof top space into useable space, which the vendor will under-take the conversion. Upon completion, rental income will commence on this space.

We are unable to reach management at this moment and thus unable to get any information on the initial yield of this property or information regarding the lease arrangement (eg. Rental step-ups, review etc). However, while we believe that earnings impact is likely to be small, we remain positive on this development given management’s proactive efforts towards sourcing for value-accretive properties apart from relying on its sponsor CWT to grow its portfolio. As such, we expect Cache to see steadily increasing earnings profile over the coming quarters as its recent acquisition acitivities start contributing to topline.

Cache intends to fund the acquisition through debt and we estimate gearing to remain <30% post acquisition, which remains conservative. Maintain Buy; TP: S$1.11