April 12, 2010

SINGAPORE EQUITY
Investment Research

Initial Public Offering Private Circulation Only

LOGISTICS
BUY Initiate
Selena Leong CACHE LOGISTICS IPO Price S$0.88
+65 6232 3898
selena.leong@dmgaps.com.sg TRUST
Terence Wong, CFA
+65 6232 3896
terence.wong@dmgaps.com.sg Ramped up and ready to go
Issue Statistics
Bloomberg Ticker CACHE SP We think Cache Logistics Trust (CLT) is priced right versus it peers at 8.7% yield
Listing Bourse Mainboard and is 7.8x over subscribed. Apart from the large market share of 97% of ramp-
Subscription Price (S$) 0.88 up warehouses, there is a high barrier to entry. CLT has quality assets with high
Invitation units (m) 474.1
- Public (m) 41.0
(above average) occupancy rates of 94.1%. Without a credit rating, CLT has a
- Placement (m) 433.1 debt headroom of another S$100m before reaching its statutory limit of 35%.
Units Post-listing (m) 632.2 Assuming a 7-8% target yield (a discount to A-REIT), CLT should be valued at
Overallotment Option (m) - between S$0.96-S$1.09, or 9-24% above its IPO price of S$0.88.
Gross Amount raised (S$m) 556.3
Market Cap @ IPO (S$m) 747.3
97.3% share of ramp-up warehouses with high barrier to entry. CLT owns
Principal Unitholders after IPO 97.3% (by GFA) of ramp-up warehouses in Singapore. As ramp-up warehouses
C&P 14.1% require large sites (>1ha) relative to conventional warehouses, the shortage of
CWT 12.2% such suitable sites in land scarce Singapore, particularly in well-established
JF Asset Management Limited
(cornerstone investor)
6.5% locations, is a natural barrier to competing new supply.
Morgan Stanley Investment
Management Company 2.5% Quality properties with high occupancy rate. The assets are well located in
(cornerstone investor) established logistics clusters, near air and sea transportation ports such as
ARA 1.9%
Public and institutional
Changi Airport, Jurong Port and PSA Terminal. The assets currently enjoy a
75% higher than average occupancy rate of 94.1% (industrial’s average at 90%).
investors

Ample room to gear up for acquisitions. CLT’s current gearing is 25.9%,

lower than most of its peers at 30-40%. As CLT does not have a credit rating, it
is only allowed to gear up to a maximum of 35% (versus 60% with rating).
Assuming 100% debt financing for new asset acquisitions, this leaves CLT with
a debt headroom of ~S$100m.

Priced right against peers. At S$0.88, CLT is priced at 8.7% yield, in between
its peers trading yield of 7-11%. A-REIT trades at 7.1% FY10 yield (heydays at
6%) while Cambridge Industrial Trust trades at 11.2% yield (heydays at 7%).
Assuming a 7-8% target yield (a 100bps discount to the larger A-REIT trading
range of 6-7%), CLT should be valued at between S$0.96-S$1.09, or 9-24%
above its IPO price of S$0.88.

Peer Comparison – Singapore Industrial REITs

Distribution Yield Debt-to- Current
Singapore REIT FY10 FY11 FY12 P/BV assets mkt cap
(%) (%) (%) (x) (%) (SGD m)
Ascendas REIT 7.1 7.2 7.1 1.20 30.8 3,611
Ascendas India Trust* 7.1 7.5 8.4 1.10 15.2 758
Cambridge Industrial Trust 11.2 11.0 11.2 0.83 41.0 431
Mapletree Logistics Trust* 7.1 7.1 7.5 1.00 38.5 1,736
AIMS-AMP Industrial REIT* 9.0 9.1 9.5 0.71 27.7 323

Source: Company and DMG Estimates

DMG
OSK Research
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 MORE ABOUT CLT

Singapore, a world-class logistics hub

According to DTZ Debenham Tie Leung (SEA) Pte Ltd’s review of the logistics property
market report, Singapore is ranked second out of 155 countries surveyed in the World
Bank’s 2010 Logistics Performance Index. Apart from being strategically located at
crossroads of international air and sea routes, Singapore has well developed
infrastructure, as well strong government support. The support for the industry has led
third-party logistics players such as DHL and TNT to set up distribution centres here.
Attracting players into Singapore would boost demand for warehousing space, benefiting
the warehouse owners.

Lease Details
CWT and C&P will be master lessees for the six assets they have injected into CLT. The
assets have an initial leaseback period on the master lease of between five to 10 years
and fixed annual rents of between S$5.2m to S$28.9m (with rent escalation to be at 1.5%
per annum). Each of the master leases are structured as a triple net lease, meaning all
on-going property expenses are borne by the master lessee, not CLT.

Acquisition Strategy
While Singapore will account for the bulk of the assets in the short term, CLT will pursue
acquisitions in the Asia Pacific region in the longer term. With the right of first refusal
(ROFR) by CWT and C&P, there are 11 properties (equivalent to 2.2m sqf GFA) that are
subjected to the ROFR as at Dec 09 and these are candidates for future asset injection by
the sponsors.

Figure 1: Potential asset injections

Source: Prospectus

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 Figure 2: Projected Statement of Total Return

Source: Prospectus

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 Figure 3: Pro forma balance sheet as at listing date

(1) – based on IPO price of S$0.88

Source: Prospectus

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 Figure 4: Initial assets in CLT

Source: Prospectus

Background on CWT (the sponsor) – a logistics leader

Established in 1970, CWT is one of the largest listed logistics operators in Southeast Asia
by market capitalisation (S$679m) and revenue (S$623.9m) for FY09. It has operations
globally. CWT’s principal businesses comprise integrated logistics solutions, international
freight forwarding, as well as engineering maintenance and facilities management services.
CWT is a market leader in many of its principal businesses, achieving significant market-
first accomplishments:

- a market leader in Asia and among the top five globally within the international freight
forwarding/Non-Vessel Operating Common Carrier market based on connectivity.

- within chemicals logistics, one of the leading logistics operators in Southeast Asia by
business volume and scope handled.

- within commodity logistics, one of the leading logistics operators in Asia and among the
top five globally by volume handled. In addition, CWT is a leading collateral manager in
Asia and one of the 26 players globally to provide licensed storage facilities for LME
warranted cargo.

- within marine engineering logistics, it is one of the largest marine engineering logistics
operators in Singapore based on business volume and scope handled, providing one-stop
metal surface preparation services to major shipyards including Keppel FELS, Labroy
Shipbuilding and Jaya Holdings.

- within container yards and depots, CWT has the largest container yard capacity in
Singapore with four container depots and operates the only recognised International
Organisation for Standardisation tank container depot in Asia.

DMG Research
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 CWT provides an entire spectrum of supply chain logistics services for some of the world’s
leading brands in the chemical, commodities, automotive, marine, oil & gas and industrial
sectors. Some of its customers include major chemical players such as Shell, BASF and
International Specialty Products, as well as major shipping lines such as American
President Lines, Pacific International Lines and Regional Container Lines.

CWT also provides logistics services complementary to global logistics service providers
such as DHL, Fedex, Schenker and Nippon Express.

Background on ARA - an experienced and leading REIT manager

CLT is managed by ARA-CWT Trust Management (Cache) Limited, a joint-venture REIT
management company 60% owned by ARA and 40% owned by CWT. ARA is an Asian real
estate fund management group listed on the SGX-ST with a market capitalisation of
S$687m. Established in Jul 02 by ARA’s Group CEO, Lim Hwee Chiang John and Cheung
Kong (Holdings) Limited, ARA’s real estate assets under management have grown
substantially from S$0.6b as at Dec 03 to S$13.5b as at Dec 09. ARA is one of the largest
REIT managers in Asia (excluding Japan) in terms of real estate assets under
management. It has an established track record of managing publicly-listed REITs in
Singapore, Hong Kong and Malaysia with a diversified portfolio spanning the office, retail
and industrial/office sectors.

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DMG & Partners Research Guide to Investment Ratings

Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage

This research is for general distribution. It does not have any regard to the specific investment objectives, financial situation and particular needs of
any specific recipient of this research report. You should independently evaluate particular investments and consult an independent financial adviser
before making any investments or entering into any transaction in relation to any securities or investment instruments mentioned in this report.

The information contained herein has been obtained from sources we believed to be reliable but we do not make any representation or warranty nor
accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions and views expressed in this report are subject to
change without notice.

This report does not constitute or form part of any offer or solicitation of any offer to buy or sell any securities, DMGAPS and its affiliates, their
directors, connected person and employees may from time to time have interest and/or underwriting commitment in the securities mentioned in this
report.

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