Brokers' take

Cache Logistics Trust | BUY (Maintained) Target price: S$0.84 Oct 29 close: S$0.71 RHB Research Institute, Oct 29

Cache posted a better quarter-on-quarter (q-o-q) performance aided by occupancy improvement and higher net property income (NPI) from several Singapore properties. NPI margin was lower year-on-year due to conversion of master leases but we expect the NPI margin to stabilise.

Overall occupancy increased q-o-q to 96.9 per cent. Occupancy at Cache's key asset - CWT Commodity Hub - rose to 94 per cent, indicating healthy demand, despite a slight oversupply in the market. We expect increased occupancy rates in the coming quarters.

While rent reversions for Q3 were lower than Q2, management noted the reversion figure for the quarter was slightly distorted as it was based on only a small lease of 13,400 sq ft. We expect logistics rents to stabilise by early 2019.

With the divestment of Jinshan Chemical Warehouse, Cache has exited the China market and should be able to better focus on its assets in Singapore and Australia. Its balance sheet is now stronger, with a modest gearing of 35 per cent, which allows some debt headroom for acquisitions.

Cache's potential upside could come from a favourable tax treatment of the 51AA rental top-up sum, which should lead to a one-off boost in DPU.

Mapletree North Asia Commercial Trust (MNACT) | BUY (Maintained) Fair value: S$1.34 Oct 29 close: S$1.13 OCBC Investment Research, Oct 29

MNACT's Q2 distribution per unit (DPU) rose 3.1 per cent year-on-year (y-o-y) and this was within our expectations.

Operationally, MNACT's overall portfolio occupancy remained high at 99.6 per cent, unchanged quarter-on-quarter.

Rental reversions as at Sept 30 came in at +40 per cent for Festival Walk's retail component and +15 per cent for the office component.

For the former, the higher-than-average reversion was driven by the lease renewal of one of the anchor tenants with a low base. Rental reversions for Gateway Plaza, Sandhill Plaza and Japan were +8 per cent, +15 per cent and +6 per cent, respectively.

In terms of risk management, MNACT has hedged 78 per cent of its debt, while approximately 80 per cent of its estimated FY2019 distributable income has been hedged into the Singapore Dollar.

However, given the ongoing macroeconomic uncertainties, we conservatively raise our cost of equity assumption from 7.3 per cent to 7.6 per cent. Our fair-value estimate is lowered from S$1.42 to S$1.34. We maintain our call, given its attractive forecast FY2019 distribution yield of 6.8 per cent.

Compiled by Navin Sregantan

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