The outlook is stable to negative. Rebalancing strategy of diversifying into Australia is paying off, with QoQ higher underlying distributable income and DPU from operations. Oversupply persists in Singapore, with likely overhang into 2018. Key risk is the expiry of the CWT Commodity Hub master lease in April 2018 (13% of NLA). However, leases with some of the underlying tenants have already been secured, should the master lease not be renewed.
Upgrade to Neutral; higher target price of $0.86 (previously $0.75)
We raised our FY17e/FY18e DPU forecast by 5.1%/3.9% as we revisit our assumptions. Our target price represents an implied FY17e forward P/NAV multiple of 1.12x, which compares against the FTSE REIT Index forward 12-months P/NAV multiple of 1.05x.
We also bumped up our terminal growth assumption to -0.5% from -1.5% on signs of the rebalancing strategy paying off. Successful execution of lowering aggregate leverage would lead us to raise our terminal growth assumption further.
Cache Logistics Trust is over-valued relative to logistics peers in terms of P/NAV multiple.