MARKET PULSE: Cache, M1 (22 Jan 2013)

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.32

Stock Name: M1
Company Name: M1 LIMITED

Research House: OCBC

Price Call: BUY

Target Price: 2.89

MARKET PULSE: Cache, M1

22 Jan 2013

KEY IDEA Cache Logistics Trust: Still room for upside Cache Logistics Trust (CACHE) turned in a consistent set of 4Q12 results after market close yesterday. FY12 DPU totalled 8.365 S cents (+1.6%), matching our/consensus full-year DPU forecasts of 8.29/8.3 S cents. This translates to an attractive FY12 yield of 6.4%, higher than the S-REIT sector average yield of 5.8%. CACHE's portfolio occupancy as at 31 Dec 2012 remained at 100% as its leases are predominantly based on triple-net master lease structures. Weighted average lease to expiry also stood resilient at 3.9 years, with only 1.7% of GFA due for renewal in FY13. In addition, its built-in rental escalation for master leases was maintained at 1.25-2.5%. This should give CACHE with good earnings visibility and healthy organic growth in our view. With the major refinancing exercise in Jun 2012, CACHE had successfully increased its loan-to-value over its previous collateral, reduced its all-in financing costs and enhanced its debt expiry profile. Aggregate leverage was also healthy at 31.7%. This provides CACHE with the financial resources and flexibility to drive its new business initiatives. We maintain BUY on CACHE with a revised fair value of S$1.32 (previously S$1.30). (Kevin Tan) MORE REPORTS M1: FY12 results mostly in line M1 Ltd reported its FY12 results, which were mostly in line - revenue of S$1076.8m was 1.5% above our estimate, while net profit of S$146.5m was 3.3% below. We note that the shortfall was due to higher-than-expected tax expenses in 4Q12. M1 declared a final dividend of S$0.063/share and a special dividend of S$0.017/share, bringing the total full-year dividend to S$0.146 (versus S$0.145). Going forward, management expects to see moderate earnings growth in 2013 and has maintained its minimum 80% dividend payout ratio. It also expects to spend S$130-150m capex to expand network coverage and capacity. We are paring our FY13 earnings forecast by 9% after taking the guidance into consideration. But as we shift our DCF valuations out to 2015, our fair value remains unchanged at S$2.89. Maintain BUY as we still believes M1 has potential gain market share in the NBN segment. (Carey Wong)

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NEWS HEADLINES - US stock markets were shut on Mon for the Martin Luther King Jr. holiday, ahead of a busy week of earnings releases. Heavyweights Google, IBM and Texas Instruments are scheduled to release quarterly results later today, while Apple and Microsoft are expected to release their results on Wed and Thu, respectively. - Singapore's industrial production likely contracted 4.2% YoY in Dec, according to the median estimate of economists polled by Reuters, suggesting that 4Q and full-year 2012 GDP could be revised downwards. - Keppel REIT's 4Q12 distributable income rose 45% YoY to S$51.9m, 13% above its forecast, as net property income grew 85% to S$32.8m. The REIT quashed talk that it was currently looking into acquiring a stake in Marina Bay Financial Centre Tower 3.