STI : 3,067.57
Price Target: 12-Month S$1.33
Clean transparent yields
• Transparent earnings with minimal downside
• Acquisitions to re-rate earnings and stock
• BUY, TPS$1.33
Transparent earnings stream with minimal downside. With minimal renewals over the coming FY14F, Cache offers strong income visibility with minimal downside risks. A majority of its income will only be expiring in FY15/16F (mainly the master-leased IPO properties) of which the manager is actively engaging with the master lessees (CWT and C&P Limited) for renewal.
Acquisition growth to be a catalyst. With a conservative gearing ratio of 29.2% (below management’s long-term 35%-40% optimal level) and a visible pipeline from sponsor’s CWT/C&P, we believe that acquisitions are likely to feature, albeit at a more moderate rate than before. The manager remains highly selective and sees more interesting opportunities in overseas markets (Malaysia and China) rather than Singapore, where the landscape is competitive.
BUY, TP S$1.33. Valuations are attractive at a forward yield of 8.2-8.3% and a 1.1x P/BV. Catalysts will hinge on acquisitions, given its portfolio of mainly master leases.
Publish date: 19/12/13