$CACHE LOGISTICS TRUST(K2LU.SI)$

ARA LOGOS Logistics Trust (ALLT SP) (from UOB KH report 28 Apr 2021)

1Q21: Sustainable Growth And Transformation By Tapping On Sponsor Pipeline

ALLT 1Q21 business update continues to demonstrate a turnaround to sustainable growth. With LOGOS installed as its new sponsor, ALLT has access to a sizeable acquisition pipeline with an AUM of US$10.2b, of which more than half is located in Singapore, Australia and China. We expect continued expansion as ALLT taps on its sponsor pipeline. ALLT provides an attractive distribution yield of 6.7% and yield spread of 5.1% for 2022. Maintain BUY. Target price: S$0.89.

RESULTS

• ARA LOGOS Logistics Trust (ALLT) reported DPU of 1.353 S cents (+35.7% yoy), which is in line with our expectations. Excluding capital distribution of S$0.6m in 1Q21 and distributable income of S$2.5m retained in 1Q20, DPU would still have increased by a respectable 6.6% yoy.

• Growth from continuation of positive rental reversion. Gross revenue and NPI grew 8.2% and 8.7% yoy respectively in 1Q21 due to: a) the commencement of new leases at several properties, such as Commodity Hub, Pandan Logistics Hub, ALOG Gul LogisCentre and Schenker MegaHub, and b) appreciation of the Australian dollar.

• ALLT signed 601,900sf of leases during the quarter (renewals: 76%, new leases: 24%).

ALLT achieved positive rental reversion of 0.9%, driven by one lease in Singapore and two leases in Australia. Weight average lease expiry (WALE) by net lettable area (NLA) remained unchanged at 2.8 years.

• Australia logistics portfolio near full occupancy. Portfolio committed occupancy improved 0.6ppt qoq to 99.1% in 1Q21. Occupancy for Singapore was stable at 98.7%. Occupancy for Australia improved 1.3ppt qoq to 99.6% as ALLT secured a replacement tenant for a logistics property located in Queensland, Australia. Growth in Australia is supported by accelerated growth from e-commerce, which led to a pick-up in enquiries for additional logistics space.

• Prudent capital management. ALLT has secured revolving loan facilities of up to S$130m and term loan facility of A$120m to partially finance the acquisition of logistics properties fromits sponsor, LOGOS Property Group. Besides a small loan of S$53m due this year, ALLT has no refinancing till 2023. Aggregate leverage remains healthy at 37.4%. All-in cost of debt improved 0.13ppt qoq to 3.09%.

STOCK IMPACT

• Completed maiden acquisition from new sponsor LOGOS Property Group. ALLT has embarked on acquisitions and fund investments from LOGOS Property Group-managed ventures, which include: a) five logistics properties in Brisbane, Australia, for S$225.9m; and b) an investment of 49.5% interest in New LAIVS Trust and 40.0% interest in Oxford Property (OP) Fund, which have five logistics properties in New South Wales and Victoria, for S$178.5m. The assets provide blended NPI yield of 5.0%. The acquisition increases geographical diversification by expanding the Australia portfolio from 35% to 51% of AUM. It was completed on 16 Apr 21.

• Divesting ALOG Changi DistriCentre 2 in Singapore. ALLT has entered into an agreement with PGI Holdings for the sale of ALOG Changi DistriCentre 2 located at 3 Changi South Street 3 for consideration of S$16.7m. It is a 3-storey cargo lift warehouse with an adjoining 4-storey office block with total NLA of 90,688sf. The sale consideration is 7.7% above valuation of S$15.5m conducted by CBRE.

• Divesting Kidman Park in South Australia. ALLT has entered into an agreement with 1835

EARNINGS REVISION/RISK

• We maintain our existing DPU forecast.

VALUATION/RECOMMENDATION

• Laggard with attractive yield spread. ALLT provides attractive distribution yield of 6.7% and yield spread of 5.1% above 10-year Singapore government bond yield of 1.6% for 2022.

It trades at P/NAV of 1.34x compared with peers’ 1.43x (FLT: 1.34x, MLT: 1.52x).

• Maintain BUY. Our target price of S$0.89 is based on the dividend discount model (DDM)

(cost of equity: 6.75%, terminal growth: 1.0%).

SHARE PRICE CATALYST

• ALLT acquiring more logistics properties in Singapore, Australia and China from sponsor LOGOS Property Group.

• ALLT benefits from yield compression as its logistics portfolio and market capitalisation expand and trading liquidity improves over time.