INITIATING COVERAGE

12 April 2010

SINGAPORE
OUTPERFORM
Cache Logistics Trust S$0.88 @10/04/10
Ramping up logistics yields Target: S$1.23
REIT

CACHE SP / CACHE.SI Janice Ding +(65) 6210 8609 – janice.ding@cimb.com

• Initiate with Outperform and target price of S$1.23. Cache Logistics Trust is a
REIT sponsored by CWT investing in income-producing logistics assets in Asia-
Pacific. We value Cache using DDM valuation (discount rate 8.4%) and arrive a
target price of S$1.23 which factors in S$220m of potential acquisitions. We believe
it is reasonable to assume acquisitions given limited scope for organic growth via
asset enhancement as the buildings are relatively new. Our target price offers a total
prospective return of 45.1% from potential price upside of 39.2% and forward 2010
yield of 5.9% from its IPO price of S$0.88.
• Master leases ensure defensible income streams. Cache’s initial portfolio is
leased back to its sponsor CWT with a triple net master lease structure. There is
limited property expenses and capital expenditure for the REIT on such a structure.
Cache’s weighted average lease expiry of 6.4 years is significantly longer than the
industrial REIT average of 4.8 years.
• Pure Singapore logistics play for now. Cache is likely to acquire assets from its
sponsor CWT, and from C&P in the short term. Staying Singapore-centric will give it
significant edge over its closest peer MapleLog which is subject to higher country
risk with a geographically diversified portfolio. The IPO price of S$0.88 prices Cache
at book value. At this level, Cache’s annualised yield of 8.8% looks highly attractive
against the SREIT sector (0.9 P/BV, 6.8% yield); and its industrial peers AREIT
(1.2x P/BV, 6.7% yield ), and MapleLog (at book value, 6.7% yield).

Financial summary
FYE Dec 2010F 2011F 2012F
Revenue (S$ m) 39.3 78.0 78.9
Net property income (S$ m) 37.8 74.9 75.8
Net property income margins (%) 96.0% 96.0% 96.0%
Pretax profit (S$ m) 45.0 51.6 52.4
Net profit (S$ m) 45.0 51.6 52.4
Distributable profit (S$ m) 32.9 57.6 58.5
EPU (S cts) 7.1 8.1 8.1
EPU growth (%) N/A 14% 1%
P/E (x) 12.5 10.9 10.8
Core EPU (S cts) 4.4 8.1 8.1
Core EPU growth (%) N/A 82% 1%
Core P/E (x) 19.8 10.9 10.8
Gross DPU (S cts) 5.2 9.0 9.1
Dividend yield (%) 5.9% 10.2% 10.3%
P/BV (x) 1.0 1.0 1.0
ROE (%) 8.2% 9.4% 9.6%
Asset leverage (%) 25.6% 42.6% 42.6%
EV/EBITDA (x) 21.9 14.2 14.1
CIMB/Consensus (x) N/A N/A N/A
Source: Company, CIMB Research, Bloomberg

Price chart Market capitalisation & share price info

1.0
1.0
0.00
-0.10
Market cap S$556.3m/US$400.2m Share price perf. (%) 1M 3M 12M
1.0
0.9
-0.20
-0.30
12-mth price range S$0.88/S$0.88 Relative 0.0 0.0 0.0
0.9 -0.40 3-mth avg daily volume 0.0m Absolute 0.0 0.0 0.0
0.9 -0.50
0.9 -0.60 # of shares (m) 632.2 Major shareholders % held
Est. free float (%) CWT Ltd 12.2
0.9 -0.70
0.8 -0.80 75.0
0.8
0.8
-0.90
-1.00
Conv. secs (m) JF Asset Management 6.5
08-Apr 09-Apr
Conv. price ( ) Morgan Stanley 2.5
Volume '00 (R.H.Scale) Cache Logistics Trust

Source: Bloomberg Source: Company, CIMB Research, Bloomberg

Please read carefully the important disclosures at the end of this publication.
Background
Pure Singapore logistics play. Trading starts today for Cache Logistics Trust, a
REIT that invests in income-producing logistics assets in Asia-Pacific. Sponsored by
CWT Limited, the initial portfolio consists of six logistics assets located in Singapore
totalling 3.9m sf in gross floor area (GFA) valued at S$730m. Cache has two
properties in each of the three major logistics clusters in Singapore – the Airport
Logistics Park of Singapore (ALPS), Changi International LogisPark South and
Penjuru/Pandan area in the Jurong Industrial Estate. The single most significant asset
in the portfolio is CWT Commodity Hub, which is the largest warehouse in Singapore
and one of the largest in Southeast Asia, and has a London Metal Exchange (LME)
status for about 4% of its GFA.
Master leases ensure defensible income streams. Cache’s leases are well
structured to ensure long term, defensible income. These include:
1. Long master lease durations ranging from 5 to 10 years, and a weighted average
lease expiry (WALE) of 6.4 years. This is significantly longer than the industrial
REIT average of 4.8 years.
2. All the leases have built-in annual rental escalation of 1.5% p.a.
3. Cache has no significant property expense or capital expenditure at the REIT
level. All its assets are leased on a triple net basis whereby master lessees bear
all property expenses including land rent, property tax, insurance and all
outgoings expenses. Capital expenditure is also limited at under S$1m for the first
two years, as the properties are relatively new (average 2.12 years, weighted by
GFA, assuming a commencement date of 1 Jan 2010).

Figure 1: Location of assets

1. CWT Commodity Hub, 24 Penjuru Road

2. CWT Cold Hub, 2 Fishery Port Road
3. C&P Changi Districentre 2, 3 Changi South Street 3
4. C&P Changi Districentre, 5 Changi South Lane
5. Schenker Megahub, 51 ALPS Avenue
6. Hi-Speed Logistics Centre, 40 ALPS Avenue
Source: Company

[ 2 ]
 Figure 2: Initial portfolio details

Date of Purchase Valuation as at

Completed Acquisitions Location Acquisition GFA Price Unit price 31 Oct 2009*
(sf) (S$ m) (S$ psf) (S$ m)
1 CWT Commodity Hub 24 Penjuru Road Apr-10 2,295,994 323.0 140.7 325.5
2 CWT Cold Hub 2 Fishery Port Road Apr-10 341,944 122.0 356.8 129.6
3 Schenker Megahub 51 Alps Avenue Apr-10 439,956 99.0 225.0 101.0
4 Hi-Speed Logistics Centre 40 Alps Avenue Apr-10 364,278 82.0 225.1 83.3
5 C&P Changi Districentre 5 Changi South Lane Apr-10 308,626 69.5 225.2 70.8
6 C&P Changi Districentre 2 3 Changi South Lane Apr-10 105,945 17.7 167.1 19.8
TOTAL 3,856,743 713.2 730.0
AVERAGE 223.3

Source: Company, CIMB Research,

*Average of Knight Frank and CBRE valuations

Figure 3: Master lease agreements

Annual rent in
Year 1 of Initial Leaseback Period on Master Leasehold term for underlyingg land
lease term Lease Option to renew from JTC
Property Master Lessee (S$ m) (year) (year) (year)
CWT Commodity Hub CWT 28.9 5 to 10 * Yes, not less than 5 years 29 yr wef 19 Aug 2006
CWT Cold Hub CWT 9.8 5 Yes, not less than 5 years 30 yr wef 20 Dec 2005 + 30 years
Schenker Megahub C&P Land Pte Ltd 7.4 Over 6yr, expiring on 31 Aug 2016 Yes, not less than 5 years 30yr wef 1 Jun 2005 + 30 years
C&P Changi Districentre C&P Distribution Pte Ltd 6.1 5 Yes, not less than 5 years 30yr wef 16 Aug 2005 + 30 years
Hi-Speed Logistics Centre C&P Distribution Pte Ltd 5.2 Over 6yr, expiring on 15 Oct 2016 Yes, not less than 5 years 30yr wef 16 Aug 2005 + 30 years
C&P Changi Districentre 2 C&P 1.5 5 Yes, not less than 5 years 30yr wef 16 Feb 1996 + 30 years
*

Source: Company, CIMB Research

Master lease agreement is for 5yr. In event that Master Lease agreement for CWT Commodity Hub is not renewed at the end of the initial 5-year term, three separate lease agreements (“CWT Commodity Hub Individual
Lease Agreement”) will commence at the expiration of the initial Master Lease term. The individual lease agreements will range from one to five years.

Grade A logistics assets. 97.3% of Cache’s portfolio (in GFA) is made up of modern
ramp-up warehouses. A ramp-up warehouse is essentially a multi-storey warehouse
with an added ramp which would enable direct vehicular access to every unit at every
level. This type of warehouse offers many advantages over conventional multi-storey
warehouses for both developers/owners (lower capex needs, ability to command
premium rents and attract MNC tenants) as well as end-users (lower service charge,
increased operational efficiency and flexibility). Ramp-up warehouses are also
relatively tight in supply. As at Dec 09, DTZ Consulting estimates there were only 1.4m
sm of such warehouses, or 20% of the islandwide warehouse supply. Cache holds
25% market share of this limited ramp-up warehouse supply.

Figure 4: Schenker Megahub (ramp-up warehouse)

Source: Company

[ 3 ]
Figure 5: Advantages of ramp-up warehouses over conventional multi-storey warehouses

Advantages of ramp-up warehouses Implication for developers / owners Implication for end-users

Lower service charge as cargo lifts consume large

No need for installation of conventional cargo lifts Lower capex needs amount of electricity and require higher maintainence
Higher building efficiency with no need to provide for cargo lifts
and common areas (up to 95% vs conventional efficiency of 80- Translates to higher rental income with increased rentable
85%) area -

Increased operational efficiency:

- Reduction in contact points when loading/unloading
will reduce opportunities for loss of goods/compromise
in security;
- Reduced manpower required for security checks;
Direct vehicular access to every unit Able to command premium ground floor rent - Increased speed in loading/unloading
Multiple loading docks Able to command premium ground floor rent Increased speed in transportation of goods

Typically higher building specifications:

- Higher floor-to-ceiling height (8-11m vs conventional 6-7m)
- Increased column width (11.4m by 1.4m vs conventional 11m
by 11m)
- Higher floor loading (20-25kn/m2 vs conventional 15-20 kn/m2) Able to attract quality MNC tenants Increased flexiblity for end-users
Tend to be much larger than conventional multi-storey
warehouses Able to attract quality MNC tenants Increased flexiblity for end-users
Source: Colliers International Research, CIMB Research

Reputable master lessees. These include sponsor CWT, and C&P which is major
shareholder of CWT. Both CWT and C&P are established logistics players in
Singapore.
CWT: Set up in 1970 as the private arm of the Port of Singapore Authority to
complement the commencement of container terminal operations in Singapore, CWT
has since grown into the largest listed logistics service company in South-East Asia,
enjoying market leadership in its sector. In January this year, the Economic
Development Board (EDB) invested S$12.6m in CWT via EDB Investments (EDBI).
We believe this signals EDB’s confidence in CWT’s ability to enhance Singapore’s
position as a global logistics hub
C&P is a privately-owned logistics company with core business divisions spanning
warehousing, transport, chemical storage and management, shipping, air cargo,
commodities and collateral management. C&P acquired shareholding control of CWT
when it bought over PSA’s entire stake in CWT in 2004. Currently, C&P holds 35.9%
of the issued share capital of CWT.
Value-add from master lessees. Apart from a quality portfolio, we believe that both
master lessees, as logistics players, have much advantage in attracting and retaining
MNC end-users over pure landlords, due to their ability to provide supporting services
to their tenants including bundling, packaging, reverse logistics, transportation,
inventory management, freight and use of space. The master lessees also
demonstrate high retention rate of 95% p.a. for the last three years at the properties.
The breakdown of subtenant lease agreements with the master lessees show that
more than half will only expire beyond 2010.

Figure 6: Service Agreement & Sub-Lease Agreement Lease Expiry Profile

Service Agreement & Sub-Lease Agreement Lease Expiry Profile

2010 2011 2012 Beyond 2012
% of Occupied GFA 26.2% 7.9% 12.3% 53.6%
Source: Company

Quality end-users to enhance portfolio stability. More than 90% of Cache’s end-
users made up of MNCs and government agencies. Additionally, end-users have
committed capital expenditure on the fit-out of 71.6% of occupied GFA. We believe
this will translate to continued high retention rates for both the master lessees and
income stability for Cache.

[ 4 ]
 Figure 7: Profile of end-users
By type By Trade Sector
% of No of
90% 85.2%
Occupied GFA End-Users
80% MNCs
Industrial & consumer goods 53.0% 14
70% Gov ernment agencies
60% Commodities & chemicals 23.0% 5
SMEs
50% Food & cold storage 8.4% 7
40% Aerospace 6.0% 2
30% Healthcare 3.9% 2
20% Courier services 2.0% 1
6.2% 8.6%
10% Hospitality 3.7% 2
0%
1

Source: Company, CIMB Research,

Right of first refusal for 13 properties totalling 3m sf. Both CWT and C&P offer
Cache the right of first refusal (ROFR) over the future sale of their owned logistics
assets in the Asia Pacific. As at 31 Dec 09, there are 11 properties (totalling 2.2m sf)
owned by CWT in Singapore and China; and 2 properties (totalling more than 723,651
sf) owned by C&P in Singapore which are subject to the ROFR.
Additionally, both master lessees are highly skilled in ramp-up warehouse
development. CWT and C&P have been responsible for about 60% of new ramp-up
warehouse developments since 2007. We anticipate that CWT and C&P’s continued
warehouse development will provide a continual acquisition pipeline for Cache both in
Singapore and in the region.

Figure 8: Cache’s potential pipeline from the CWT and C&P ROFR

1) C&P Hub 3 is subject to an existing right of first refusal. Cache will only be able to acquire C&P Hub 3 if the property has not been acquired pursuant to the existing right of first refusal.

Source: Company

[ 5 ]
Competition in Singapore. As at Dec 09, there was some 6.9m sq m of warehouse
space in Singapore that is almost wholly owned (99%) by the private sector. Large
clusters of warehouses have been developed the airport in the East of Singapore, and
the seaport in the West. Ownership is highly fragmented in Singapore with many
market players. Cache’s competitors for warehouse space in the private sector include
the four listed industrial REITs: Ascendas REIT, Mapletree Logistics Trust, Cambridge
Industrial Trust, and AIMSAMP REIT; private equity funds, as well as industrialists who
are end-users of the properties. MapleLog is Cache’s closest competitor, being also a
pure logistics REIT. Cache is about one quarter of MapleLog in terms of market cap
and asset size.

ARA-CWT Trust Management (Cache) Limited is the manager of Cache Logistics

Trust. The REIT manager is 60% owned by ARA and 40% owned by the sponsor
CWT. Separately, the property manager of Cache is 60% owned by CWT and 40%
owned by ARA.

Outlook
Double-digit growth forecasted for Asian Pacific and Singapore logistics
markets. According to DTZ’s Independent review of the logistics property market, the
Asian Pacific contract logistics market size has grown by more than 10% annually
since 2004, led by Japan and China. However, penetration rate is still relatively low at
10%, inferring that 90% of logistics activities are still conducted in-house. As industry
players continue to focus on increasing operational efficiencies and profitability,
outsourcing of logistics operations to 3PLs is expected to increase. Transport
Intelligence forecasted that the Asia Pacific contract logistics market will grow at
CAGR of 11.3% between 2007-11 to reach S$121.3bn; and Singapore would grow at
a CAGR of 16% to S$1.8bn by 2011.
Singapore has been able to draw many global logistics players to locate their
operations here with its strategic location, established logistics hub status and
regulatory support in the form of incentives schemes. According to SJ Consulting, 21
of 25 global logistics providers have significant presence in Singapore. This augurs
well for the demand for logistics space in Cache’s portfolio.

Figure 9: Selected Asia Pacific Contract Logistics Market

Source: Transport Intelligence, DTZ Consulting

[ 6 ]
Figure 10: Top 25 Global Logistics Companies (2008)

Source: SJ Consulting, DTZ Consulting

* Refers to companies that do not have a presence in Singapore.

Limited land supply for development logistics parks. Non strata-titled warehouses
are typically developed with land obtained from JTC Corporation, the national agency
and developer of industrial infrastructure. According to JTC, only some 40ha, or 11%
of the land designated for the development of logistics parks remains unallocated. Out
of the 8 logistics parks, two of them (Changi International LogisPark South and
Clementi West LogisPark) have no more land supply for future development.

Figure 11: Top 25 Global Logistics Companies (2008)

Source: DTZ Consulting

[ 7 ]
Figure12: Prepared Industrial Land for Logistics Parks

Source: JTC, DTZ Consulting

Figure13: Summary of Logistics Parks

Source: JTC, DTZ Consulting

[ 8 ]
Warehouse rents and prices starting to trend up. An examination of the 75th
percentile warehouse rents (reflecting higher quality warehouses) showed peak rents
of S$1.87psf/mth in 4Q08, a 25% yoy increase tracking strong economic growth in
2007. Although rents fell under the impact of the global economic downturn for three
quarters in 2009, we saw a recovery by 4Q09 of 4% qoq. The same trend of recovery
is repeated in median prices for multiple-user warehouse space which saw a 5% qoq
increase in 4Q09. We believe the upward trend will continue with gradual global
economic recovery, auguring well for Cache’s portfolio.

Figure14: 75th percentile rents for multiple-user warehouse

Source: URA, DTZ Consulting

Figure15: Median prices for multiple-user warehouse

Source: URA, DTZ Consulting

[ 9 ]
Figure 16: SWOT analysis

Strengths Opportunities
• Grade A logistics assets • Low asset leverage
• Logistics sponsor/master lessees able to value-add with supporting • Right of first refusal to CWT and C&P assets
services, more edge over pure landlords • Sponsor has warehouse development expertise, able to incubate future
• Weighted average lease expiry of 6.4years above industrial REIT average development projects for Cache.
of 4.8%
• 12 months of security deposits for all leases

Weaknesses Threats
• Tenant concentration risk • Subject to interest rate volatility
• Asset concentration risk • Intense competition for tenants/end-users and assets for acquisitions from
• Country concentration risk other industrial REITs, private funds and industry players.
• Limited scope for asset enhancement • REIT manager has no track record in managing industrial REITs.
Source: Company, CIMB Research

Risks
Tenant concentration risk. Cache is wholly dependent on its master lessees CWT
and C&P for rental income. Failure of the master lessees to fulfil lease obligations may
severely impact on Cache’s ability to distribute dividends to its unitholders.
Nonetheless, we believe that this risk is significantly mitigated by the following: 1)
payment of a upfront 12 months security deposit for each of the leases in the form of
cash or bank guarantees; and 2) relative ease in finding end-user tenants with Cache’s
quality portfolio.
Asset concentration risk. There is considerable asset concentration risk with almost
half of the revenue contribution attributed to CWT Commodity Hub. In event of any
occurrence which may impact the building, such as Acts of God, and non-land renewal
and/or change of land use by the authorities, rental contribution to Cache may be
severely impacted. This risk is moderately mitigated, in our view, by industrial all risk
insurance undertaken by the master lessees.

Figure 17: Portfolio breakdown

By GFA By Rental Contribution

CWT Cold Schenker

CWT
Hub 11% CWT Cold
Hi-Speed Commodity
9% Hub
8% Hub
17%
48%
C&P Changi
Distri
CWT Schenker
9%
Commodity 13%
Hub C&P Changi C&P Changi C&P Changi Hi-Speed
60% Distri 2 Distri 2 Distri 9%
3% 3% 10%

Source: Company, CIMB Research,

Country concentration risk. All of Cache’s warehouses are located in Singapore and
any decline in Singapore’s distribution hub status could impair on its end-users/master
lessee’s ability to fulfil lease obligations, and hence Cache’s ability to distribute
dividends to its withholders.
Intensifying competition in the REIT space. As the economy and credit conditions
in Singapore improve, we expect competition in the REIT space for both tenants and
acquisition targets to intensify.
Asset leverage capped at 35%. With no credit rating for now, Cache’s asset leverage
is capped at 35%. There is no assurance that it will be able to obtain a credit rating to
raise its leverage ceiling to 60%. If Cache is unable to obtain a credit rating, this may
impact on its acquisition growth strategy.
REIT manager may not be able to deliver. The REIT manager of Cache, ARA-CWT
Trust Management (Cache) has no established track record in managing industrial

[ 10 ]
REITs. Hence, there is no assurance that the manager will be able to deliver.
However, this moderately mitigated, in our view, by the experience in REIT and real
estate management brought on board by its key management:
• Mr Daniel Cerf, CEO : Previous CEO of KREIT Asia, 20 years experience in real
estate management and development in Asia
• Mr Foo Say Chuang, Director and Head of Asset Management: Previous General
Manager in CWT, more than 25 years experience in logistics.
• Mr Ho Jiann Ching, Director and Head of Investment: Previous Director of
Business Development in Ayala International, more than 16 years experience in
real estate investment, development, asset management and marketing in the
region.

Financials
Asset leverage at 26%. As at listing, Cache has S$191m of debt (including upfront
fees), drawn earlier to part finance its initial portfolio. This represents 26% leverage on
its S$730m asset base. Currently, Cache does not have any credit rating. Hence asset
leverage is capped at 35%. This implies debt headroom of S$101m to fund potential
acquisitions. However, if it is able to obtain a credit rating (which would raise the asset
leverage ceiling from 35% to 60%), and assuming a gearing target of 45%, Cache’s
debt headroom will be increased to S$252m, significant enough for sizeable
acquisitions.

Factoring S$220m of acquisitions. As the age of the initial portfolio is relatively

young, we anticipate there would be more scope for growth via acquisitions, rather
than organic growth via asset enhancement in the short term. We also expect near-
term acquisitions to be focused in Singapore rather than overseas. Out of the assets
which are under the CWT and C&P ROFR, we deduce that CWT Logistics Hub 1 and
C&P Logistics Hub 3 are the most likely to be injected in the short term as both are
operationally ready. Assuming a sale price of S$200psf for the combined 1.1m sf of
space between the two assets, we estimate an acquisition quantum of S$220m in
2011. We assume that the assets will be acquired 8% net property yield, and wholly
financed with debt by 2011, when it has obtained credit rating.
NPI margin assumption at 97%. We expect net property income (NPI) margins from
new acquisitions to be on par with those of its existing portfolio as it is likely to
structure similar triple net lease terms with future tenants or master lessees. We have
applied the same margins of 97% to its potential acquisitions.

Consistent and stable revenue. Projection for Cache’s revenue is highly visible, with
the first year of rental contribution and annual escalation of 1.5% p.a.
Limited capex needs. We expect limited capex needs as the initial properties are
relatively new. We have assumed under S$1m of capex needs in our model.

[ 11 ]
Figure18: Key assumptions used
KEY ASSUMPTIONS
Rental growth forecast (%) 2010F 2011F 2012F
CWT Commodity Hub - 1.5% 1.5%
CWT Cold Hub - 1.5% 1.5%
Schenker Megahub - 1.5% 1.5%
Hi-Speed Logistics Centre - 1.5% 1.5%
C&P Changi Districentre - 1.5% 1.5%
C&P Changi Districentre 2 - 1.5% 1.5%
Portfolio Average - 1.5% 1.5%

GFA (sf) 2010F 2011F 2012F

CWT Commodity Hub 2,295,994 2,295,994 2,295,994
CWT Cold Hub 341,944 341,944 341,944
Schenker Megahub 439,956 439,956 439,956
Hi-Speed Logistics Centre 364,278 364,278 364,278
C&P Changi Districentre 308,626 308,626 308,626
C&P Changi Districentre 2 105,945 105,945 105,945
Portfolio Total 3,856,743 3,750,798 3,750,798

Rental Rates (Triple Net) S$psf/mth 2010F 2011F 2012F

CWT Commodity Hub 1.05 1.07 1.08
CWT Cold Hub 2.40 2.44 2.47
Schenker Megahub 1.40 1.42 1.44
Hi-Speed Logistics Centre 1.40 1.42 1.44
C&P Changi Districentre 1.40 1.42 1.44
C&P Changi Districentre 2 1.20 1.22 1.24
Portfolio S$psf/mth 1.48 1.50 1.52

Occupancy Rates (%) 2010F 2011F 2012F

CWT Commodity Hub 100.0% 100.0% 100.0%
CWT Cold Hub 100.0% 100.0% 100.0%
Schenker Megahub 100.0% 100.0% 100.0%
Hi-Speed Logistics Centre 100.0% 100.0% 100.0%
C&P Changi Districentre 100.0% 100.0% 100.0%
C&P Changi Districentre 2 100.0% 100.0% 100.0%
Portfolio Average 100.0% 100.0% 100.0%

PROJECTED REVENUE
Property rental revenue (Existing) S$m 2010F 2011F 2012F
CWT Commodity Hub 28.930 29.363 29.804
CWT Cold Hub 9.848 9.996 10.146
Schenker Megahub 7.391 7.502 7.615
Hi-Speed Logistics Centre 6.120 6.212 6.305
C&P Changi Districentre 5.185 5.263 5.342
C&P Changi Districentre 2 1.526 1.548 1.572
A: Total Revenue from existing portfolio 58.999 59.884 60.782

New acquisitions S$m

Property acquisition assumptions S$ m 0 220 0
Net property yields 8.0% 8.0% 8.0%
NPI margin (%) 97.0% 97.0% 97.0%
Occupancy levels of new acquisitions 100.0% 100.0% 100.0%
Additional gross revenue from development - 18.14 -
Contribution to revenue in current year (%) 50.0% 100.0% 100.0%
Contribution to revenue in current year S$m - 18.14 -
B: Cummulative revenue from acquisitions - 18.14 18.14

TOTAL REVENUE (A+B) 39.33 78.03 78.93

Note: Assume 8 months of revenue contribution in 2010 from listing in April

Other assumptions 2010F 2011F 2012F

Cost of debt 4.50% 4.00% 4.00%
REIT manager fees
Base fees (% of Assets) 0.5% 0.5% 0.5%
Performance fees (% of Net Property Income) 1.5% 1.5% 1.5%
% of REIT manager fees paid in units 75.0% 75.0% 75.0%
Acquisition fees (of purchase price) 1.0% 1.0% 1.0% Not applicable to IPO properties
Divestment fees (of divestment price) 0.5% 0.5% 0.5%
Trustee fees (% of Deposited Property) 0.03% 0.03% 0.03%
Property manager fees (% of Gross Revenue) 2.0% 2.0% 2.0%
Lease management fees (% of Gross Revenue) 1.0% 1.0% 1.0% Waiver on IPO properties for 3 years

Source: CIMB Research

[ 12 ]
Valuation and recommendation
Management will concentrate on acquisition growth strategy. We understand that
the management intends to focus more on growth via acquisition in the next 1-2 years
as there is relatively limited scope for organic growth via asset enhancement, the
properties being relatively new. Hence, we believe it is reasonable to assume
acquisitions even at this stage. We also deduce that starting with acquisitions from the
sponsor’s Singapore assets is easier for Cache as assessing overseas acquisitions
will require considerable more time.

DDM-derived valuation of S$1.23. We have used DDM to value Cache, the

methodology we use to value all the REITs under our coverage. The average cost of
debt has been estimated at 4.5% for its current indebtedness. We use a discount rate
of 8.4%, derived from a risk-free rate of 4%, an equity risk premium of 4.4% and a beta
of 1.0. The discount rate used is in line with that used for AREIT, which is also
Singapore-centric. We have also assumed a terminal growth rate of 1.3%. We arrive at
a DPU estimate of 5.17cts in 2010 (based on 8 months of revenue contribution from
April) and 8.98cts in 2011 with our acquisition assumptions. This translates to a
prospective dividend yield of 5.9% for 2010 (or 8.8% on an annualised basis) and
10.2% for 2011 from its IPO price of S$0.88. Our target price from the DDM valuation
is S$1.23.

Without any acquisition assumptions, our DPU estimates for 2011-12 will be lowered
by 14%, and target price will be S$1.06.

Figure 19: DPU and target price change with and without acquisition scenario
Target
DPU forecast (S cts) 2010F 2011F 2012F price
Assuming S220m acquisitions 5.17 8.98 9.05 $ 1.23
Assuming no acquisitions 5.17 7.72 7.80 $ 1.06
Change in DPU forecast -14% -14%

Source: CIMB Research

Initiate coverage with Outperform. Our target price of S$1.23 offers a total
prospective return of 45.1% from potential price upside of 39.2% and forward 2010
yield of 5.9% from its IPO price of S$0.88.

We like Cache for its quality portfolio, visible income streams, and strong sponsor-
cum-master lessee. Further, the prospect of Cache of being able to acquire while
staying Singapore-centric in the short term will give it significant edge over its closest
peer MapleLog which is subject to higher country risk with a geographically diversified
portfolio.

The IPO price of S$0.88 prices Cache at book value. At this level, Cache’s annualised
yield of 8.8% looks highly attractive against the SREIT sector which is trading at 0.93
and offering average yields of 6.8%; and also vs its industrial peers AREIT (1.2x P/BV,
6.7% yield ), and MapleLog (at book value, 6.7% yield). Only Cambridge Industrial
Trust appears to be considerably cheaper at 0.8x P/V and 10.2% yields. Nonetheless,
we believe the discounted position indicates its weaker capital position (asset leverage
at 42.6%) and portfolio quality.

[ 13 ]
Figure 20: SREIT overview

Last Target Total return

reported Last Price / Price (Prospective
Bloomberg Price as of asset stated Stated (DDM- 2010 2011 2012 price upside +
REIT Ticker 10 Apr 2010 leverage NAV NAV based) Rec. Yield Yield Yield 2010 yield)
Hospitality
Ascott Residence Trust ART SP $1.26 40.6% 1.34 0.94 $ 1.35 N 6.5% 6.8% 6.9% 13.7%
CDL Hospitality Trust CDREIT SP $1.90 30.0% 1.43 1.33 $ 2.01 O 6.0% 6.6% 6.9% 11.7%
35.3% 1.13 6.3% 6.7% 6.9%
Industrial
Ascendas Reit AREIT SP $1.95 31.2% 1.61 1.21 $ 2.02 U 6.7% 7.4% 7.6% 10.2%
Cache Logistics Trust CACHE SP $0.88 25.9% 0.87 1.01 $ 1.23 O 5.9% 10.2% 10.3% 45.1%
Cambridge Industrial Trust CREIT SP $0.50 42.6% 0.60 0.83 $ 0.53 NR 10.2% 10.4% 10.0%
Mapletree Logistics Trust MLT SP $0.84 36.7% 0.85 0.98 $ 0.74 U 6.7% 6.9% 6.9% -4.6%
34.1% 1.01 7.4% 8.7% 8.7%
Office
Fraser Commercial Trust FCOT SP $0.15 40.4% 0.27 0.56 $ 0.16 NR 10.0% 7.3% 7.3%
CapitaCommercial Trust CCT SP $1.10 33.2% 1.41 0.78 $ 1.09 U 6.7% 6.7% 7.0% 5.8%
K-Reit KREIT SP $1.10 27.7% 1.50 0.73 $ 0.92 NR 6.3% 6.0% 4.5%
Suntec REIT SUN SP $1.37 33.3% 1.78 0.77 $ 1.59 O 7.2% 7.3% 7.3% 23.2%
31.4% 0.71 7.5% 6.8% 6.6%
Retail
CapitaMall Trust CT SP $1.81 30.5% 1.56 1.16 $ 1.88 N 5.1% 5.4% 5.9% 9.0%
Frasers Centrepoint Trust FCT SP $1.35 29.7% 1.22 1.11 $ 1.73 O 5.4% 6.5% 6.7% 33.6%
Starhill Global REIT SGREIT SP $0.59 26.9% 0.82 0.72 $ 0.65 NR 6.6% 6.4% 5.9%
29.0% 1.00 5.7% 6.1% 6.2%
Healthcare
Parkway Life REIT PREIT SP $1.33 27.4% 1.39 0.96 $ 1.57 O 6.6% 7.0% 7.1% 24.7%
Healthcare simple average 27.4% 0.96 6.6% 7.0% 7.1%
S-REITs simple average 32.6% 0.93 6.8% 7.2% 7.2%
O = Outperform, N = Neutral, U = Underperform, NR = Not Rated
Source: Company, CIMB Research

[ 14 ]
Financial tables

PROFIT & LOSS KEY RATIOS

(S$ m, FYE Dec) 2010F 2011F 2012F (FYE Dec) 2010F 2011F 2012F
Revenue 39 78 79 Revenue growth (%) N/A 98.4 1.2
Operating expenses (2) (3) (3) EBITDA growth (%) N/A 100.4 1.2
Net property income 38 75 76 Pretax margins (%) 114.4 66.1 66.4
Management fees (3) (6) (6) Net profit margins (%) 114.4 66.1 66.4
Trustee's fees 0 0 0 Interest cover (x) 6.1 4.2 4.2
Net interest & invt income (6) (16) (16) Effective tax rates (%) 0.0 0.0 0.0
Associates' contribution 0 0 0 Net dividend payout (%) 73.1 111.7 111.5
Exceptional items & revaluation 17 0 0 Debtors turnover (days) 20.0 10.1 10.0
Others (1) (1) (1) Stock turnover (days) 0.0 0.0 0.0
Pretax profit 45 52 52 Creditors turnover (days) 45.6 23.0 22.7
Tax 0 0 0
Minority interests 0 0 0
Net profit 45 52 52
Distributable profit 33 58 58
Adj. wt. units (m) 637 639 644
Unadj. year-end units (m) 637 642 647

BALANCE SHEET KEY DRIVERS

(S$ m, end Dec) 2010F 2011F 2012F (FYE Dec) 2009 2010F 2011F 2012F
Investment properties 731 952 953 Potential acqn & devt (S$m) N/A N/A 220 0
Intangible assets 0 0 0 Logistics rent growth (%) 0.0% 0.0% 1.5% 1.5%
Other long-term assets 0 0 0
Total non-current assets 731 952 953
Cash and equivalents 5 4 3
Stocks 0 0 0
Trade debtors 2 2 2
Other current assets 0 0 0
Total current assets 7 7 6
Trade creditors 5 5 5
Short-term borrowings 0 0 0
Other current liabilities 0 0 0
Total current liabilities 5 5 5
Long-term borrowings 184 404 404
Other long-term liabilities 0 0 0
Total long-term liabilities 184 404 404
Shareholders' funds 549 549 549
Minority interests 0 0 0
NTA/unit (S$) 0.86 0.86 0.85

CASH FLOW
(S$ m, FYE Dec) 2010F 2011F 2012F
Pretax profit 45 52 52
Depreciation & non–cash adj. 0 0 0
Working capital changes 3 0 0
Cash tax paid 0 0 0
Others (9) 21 21
Cash flow from operations 39 72 73
Capex (1) (1) (1)
Net investments & sale of FA (713) (220) 0
Others 1 0 0
Cash flow from investing (713) (221) (1)
Debt raised/(repaid) 184 220 0
Equity raised/(repaid) 525 0 0
Dividends paid (33) (58) (58)
Cash interest & others (4) (15) (15)
Cash flow from financing 673 148 (73)
Change in cash (1) (1) (1)
Change in net cash/(debt) (185) (221) (1)
Ending net cash/(debt) (179) (400) (401)
Source: Company, CIMB Research, Bloomberg

[ 15 ]
APPENDICES…

[ 16 ]
1. Management profile
Mr Daniel Cerf
Chief Executive Officer
Mr Ho Jiann Ching
Director and Head, Investments
Mr Foo Say Chuang
Director and Head, Asset Management than 25 years of experience of logistics experience in local and multinational
Ms Serina Lim
Finance and Investor Relations
Manager
Source: Company, CIMB-GK Research
Mr Cerf is the Chief Executive Officer of the Manager. He has more than 20 years of
experience working on real estate investment and development ventures in Asia.
Prior to joining the Manager, he was deputy CEO, and subsequently CEO of K-REIT
Asia from 2006-2009. He has also held key director and management positions with
First Pacific Land in Hong Kong, Singapore and Malaysia. Mr Cerf is a licensed
architect in the United States and holds a Bachelor of Architecture degree (Dean’s
list) from the University of Oklahoma, USA.
Mr Ho is Director and Head of Investment of the Manager. He has more than 16
year of experience in real estate investment, development, asset management and
marketing in the regional property markets. Prior to joining the Manager, Mr Ho
spent more than 8 years as the director of business development in Ayala
International Holdings Limited (the regional real estate arm of Ayala Corporation,
listed in Philippines) from 2001 to 2009. Mr Ho holds a Bachelor of Science
(Honours) degree in Estate Management from the National University of Singapore.
Mr Foo is Director and Head of Asset Management of the Manager. He has more
corporations. Prior to joining the Manager, he was general manager, and
subsequently managing director of CWT from 2002 to 2009, where he was
responsible for the development and expansion of the Group’s logistics business in
Singapore and in the region including Russia, India, Malaysia and Thailand.
Mr Foo holds a Bachelor of Business in Transport degree from the Royal Melbourne
Institute of Technology.
Ms Lim is the Finance Manager and Investor Relations Manager in the Manager. Ms
Lim has more than 18 years experience in audit, accounting and finance-related
work. Prior to joining the Manager, Ms Lim was assistant vice president (fund
finance) with RREEF Alternative Investments (Asia Pacific), the global alternative
investment management business of Deutsche Bank’s Asset Management division.
Ms Lim holds a Bachelor of Accountancy degree from the National University of
Singapore and is a Certified Public Accountant with the Institute of Certified Public
Accountants of Singapore.
[ 17 ]
2. Trust structure

Source: Company

[ 18 ]
 4. Fees payable by CLT
1. Manager’s management fees
2. Trustee's fee
3. Other fees or charges
(i) Acquisition fee
(ii) Divestment fee
(iii) Property management fee
Source: Company
[ 19 ]
Fee structure
(a) Base fee
0.5% per annum of the value of consolidated assets.
(b) Performance fee
1.5% per annum of the net property income of CLT in the relevant
financial year.
0.03% per annum of the value of the deposited property, subject to a
minimum of S$15,000 per month, excluding out-of-pocket expenses
and GST.
1.0% of the acquisition price of any real estate purchased, whether
directly or indirectly by CLT, plus any other payments in connection with
the purchase of the real estate (pro-rated if applicable, to CLT’s
interest);
0.5% of the sale price of any real estate sold or divested, whether
directly or indirectly by CLT, plus any other payments in connection with
the sale or divestment of the real estate (pro-rated if applicable to CLT’s
interest)
(a) Property management fee of 2.0% per annum of Gross Revenue of
each property, payable to the Property Manager
(b) Lease management fee of 1% per annum of Gross Revenue of each
property, payable to the Property Manager
No lease management fee is payable in relation to the Initial Portfolio
for the first three years of the initial contracted lease
5. CWT
Began as a private arm of PSA. CWT was set up in 1970 as the private arm of the
Port of Singapore Authority (PSA) to complement the commencement of container
terminal operations in Singapore, by building up container trucking capabilities,
establishing container depot operations and preparing for land-based container
operations. Over the years, CWT diversified into other logistics and related services
and was listed on the Singapore Exchange in 1993, the first logistics company to be
listed on the main board of SGX.

CWT started a new chapter in 2004 when C&P Holdings (C&P), a privately-owned
logistics company, acquired shareholding control of the group after agreeing to buy
over PSA’s entire stake of 55% for S$45.8m.
Experienced and committed management. After this purchase, the management
team became headed by Group Chairman Mr Loi Kai Meng and Group CEO Mr Loi
Pok Yen, both with extensive experience in the logistics business. They focused on
improving cost efficiency, marketing and development strategies. Steps were taken to
streamline the organisation structure and accelerate growth in Asia by focusing on key
regional markets such as China, the Middle East and South-East Asia.
Now an aspiring multi-national logistics solutions provider. CWT now operates
from more than 20 countries, offering integrated supply chain logistics solutions to
worldwide customers, focusing on three businesses: Logistics, Non-Vessel Operating
Common Carrier (NVOCC) also known as International Freight Forwarding and
Engineering Maintenance and Facility Management.

Source: CIMB Research

[ 20 ]
5. ARA

Managing Asian REITs and private real-estate funds. Listed on the Singapore
Exchange on 2 Nov 07, ARA is an Asian real-estate fund-management company
established by Mr John Lim and a subsidiary of Cheung Kong Holdings. It focuses on
the management of listed REITs and private real-estate funds. As at 31 Dec 09, total
assets under management were S$13.5bn.

Four REITs and three private funds. As at 31 Dec 09, ARA managed four REITs with
over 8m sf of real estate. The four were Suntec REIT (listed in Singapore), Fortune
REIT (listed in Hong Kong and Singapore), Prosperity REIT (listed in Hong Kong) and
AMFirst REIT (listed in Malaysia);

ARA also manages three private-estate funds: Asian Dragon Fund (ADF), Asian Asset
Income Fund (AAIF) and Harmony Fund. Another fund, the Al Islami Far Eastern Real
Estate Fund (the first shariah-compliant private real-estate fund in Asia) was divested
in Oct 07 for an internal rate of return of 23.7%.

Major shareholders. ARA is 36.7% owned by Mr John Lim Hwee Chiang, the Group
CEO and affiliated with Hong Kong-listed property developer, Cheung Kong Holdings
through a 15.62% stake.

Source: CIMB Research

[ 21 ]
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[ 22 ]
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RECOMMENDATION FRAMEWORK #1*

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: The stock's total return is expected to exceed a relevant
benchmark's total return by 5% or more over the next 12 months.
NEUTRAL: The stock's total return is expected to be within +/-5% of a relevant
benchmark's total return.
UNDERPERFORM: The stock's total return is expected to be below a relevant
benchmark's total return by 5% or more over the next 12 months.
TRADING BUY: The stock's total return is expected to exceed a relevant
benchmark's total return by 5% or more over the next 3 months.
TRADING SELL: The stock's total return is expected to be below a relevant
benchmark's total return by 5% or more over the next 3 months.
OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 12
months.
NEUTRAL: The industry, as defined by the analyst's coverage universe, is
expected to perform in line with the relevant primary market index over the next
12 months.
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,
is expected to underperform the relevant primary market index over the next 12
months.
TRADING BUY: The industry, as defined by the analyst's coverage universe, is
expected to outperform the relevant primary market index over the next 3
months.
TRADING SELL: The industry, as defined by the analyst's coverage universe,
is expected to underperform the relevant primary market index over the next 3
months.

* This framework only applies to stocks listed on the Singapore Stock Exchange, Bursa Malaysia, Stock Exchange of Thailand and Jakarta Stock Exchange. Occasionally, it is permitted for the total expected returns to be
temporarily outside the prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

CIMB-GK Research Pte Ltd (Co. Reg. No. 198701620M)

[ 23 ]
 RECOMMENDATION FRAMEWORK #2 **

STOCK RECOMMENDATIONS SECTOR RECOMMENDATIONS

OUTPERFORM: Expected positive total returns of 15% or more over the next OVERWEIGHT: The industry, as defined by the analyst's coverage universe,
12 months. has a high number of stocks that are expected to have total returns of +15% or
better over the next 12 months.
NEUTRAL: Expected total returns of between -15% and +15% over the next NEUTRAL: The industry, as defined by the analyst's coverage universe, has
12 months. either (i) an equal number of stocks that are expected to have total returns of
+15% (or better) or -15% (or worse), or (ii) stocks that are predominantly
expected to have total returns that will range from +15% to -15%; both over the
next 12 months.
UNDERPERFORM: Expected negative total returns of 15% or more over the UNDERWEIGHT: The industry, as defined by the analyst's coverage universe,
next 12 months. has a high number of stocks that are expected to have total returns of -15% or
worse over the next 12 months.
TRADING BUY: Expected positive total returns of 15% or more over the next 3 TRADING BUY: The industry, as defined by the analyst's coverage universe,
months. has a high number of stocks that are expected to have total returns of +15% or
better over the next 3 months.
TRADING SELL: Expected negative total returns of 15% or more over the next TRADING SELL: The industry, as defined by the analyst's coverage universe,
3 months. has a high number of stocks that are expected to have total returns of -15% or
worse over the next 3 months.

** This framework only applies to stocks listed on the Hong Kong Stock Exchange and China listings on the Singapore Stock Exchange. Occasionally, it is permitted for the total expected returns to be temporarily outside the
prescribed ranges due to extreme market volatility or other justifiable company or industry-specific reasons.

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