SG: MARKET PULSE: A-REIT, Singapore Post, Cache Logistics (19 Mar 2013)

Stock Name: Ascendasreit
Company Name: ASCENDAS REAL ESTATE INV TRUST

Research House: OCBC

Price Call: HOLD

Target Price: 2.60

Stock Name: SingPost
Company Name: SINGAPORE POST LIMITED

Research House: OCBC

Price Call: HOLD

Target Price: 1.23

Stock Name: CACHE
Company Name: CACHE LOGISTICS TRUST

Research House: OCBC

Price Call: BUY

Target Price: 1.34

MARKET PULSE: A-REIT, Singapore Post, Cache Logistics

19 Mar 2013

KEY IDEA Ascendas REIT: Acquires property following placement Ascendas REIT (A-REIT) yesterday announced the proposed acquisition of The Galen at 61 Science Park Road for a purchase consideration of S$126.0m. The Galen is a six-storey multi-tenanted science park building located within Singapore Science Park II and has a NLA of 234,384 sqft. It is currently 97.5% occupied, with Ascendas Land and the REIT manager taking up c. 22.5% of the lease space. The property, we note, was first mentioned as a potential acquisition asset when it raised S$406.4m through a private placement of 160m new units on 8 Mar. According to A-REIT, the asset is expected to generate a NPI yield of 6.8% and add 0.052 S cents to its DPU on an annualised basis, assuming the acquisition is fully funded using the proceeds from the placement. This is in line with our initial assumptions made on the transaction. We maintain HOLD on A-REIT with an unchanged fair value of S$2.60. (Kevin Tan) MORE REPORTS Singapore Post: Awaiting news of larger acquisitions In recent months, Singapore Post (SingPost) has been acquiring stakes in companies to build its non-mail businesses - it completed the 100% acquisition of General Storage Company Pte Ltd (GSC) in end Jan for S$37m and the 62.5% acquisition of Famous Holdings Pte Ltd (FH) in end Feb this year for S$60m. We see synergies with the group's logistics and e-commerce businesses, but note that these acquisitions remain on a relatively small scale as we await news of larger acquisitions. Meanwhile, the stock has been trading in a range of S$1.18-S$1.23 since we downgraded it to HOLD on 28 Jan. We like SingPost's stable operating cash flows and consistent dividends, but see few re-rating catalysts for now. Maintain HOLD with S$1.23 fair value estimate. (Low Pei Han) Cache Logistics Trust: Private placement to fund acquisition Cache Logistics Trust (CACHE) has exercised the call option and entered into the S&P agreement with Precise Development Pte Ltd to acquire the fully ramp-up warehouse known as Precise Two last evening. Separately, CACHE is proposing to carry out a private placement of 70m new units to institutional and other investors at an issue price of S$1.24-S$1.265 apiece. About S$86.8m in gross proceeds are expected to be raised (based on S$1.24 issue price), of which 66.0% (~S$57.3m) will be used to wholly fund the proposed acquisition of Precise Two, while the balance will be deployed to fund future investments or pare down debt. We understand that the issue price will be determined by today. An advanced distribution of ~2.12 S cents per unit is also expected to be paid to entitled unitholders around 26 Apr. We are currently reviewing our estimates as we have previously anticipated the acquisition to be fully funded by debt. For now, we place our Buy rating and S$1.34 fair value under review. (Kevin Tan)

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NEWS HEADLINES - US stocks on Monday fell for a second session as Europe's efforts to get a handle on a rescue of Cyprus provided enough uncertainty for a much-anticipated retreat on Wall Street. - Singapore's non-oil domestic exports fell 30.6% YoY last month, dragged down by a sharp drop in pharmaceuticals and oil rigs and continued weakness in electronics. - The Asian Development Bank has sounded a strong warning about the danger of "asset bubbles" developing in the region's local-currency bond markets. - S-REITs are exposing themselves to various risks as they rely more and more on debt financing, a trend that is likely to continue this year, according to Fitch Ratings. - Yongnam Holdings said it intends to diversify its business into the business of investing into infrastructural developments in addition to the group's current core business.