Cambridge Industrial Trust - Growing distributions (DBSVikcers)

BUY S$0.46 STI : 2,733.97

Price Target : 12-Month S$ 0.58 (Previous S$0.56)

Reason for Report : Post results update

Potential Catalyst: Strong 3Q11 results

DBSV vs Consensus: Contribution from new acquistions

• 3Q11 DPU of 1.08 Scts (+6% qoq) in line

• Deployment of cash to develop projects/new purchases; FY12/13 earnings continue to grow

• Offers F Y11-13F yields of over c10-11%, BUY!

Results in line; DPU growth continued in 3Q11 Gross revenues and net property income were up by 13.9% and 10.3% to S$20.7 m and S$17.6m respectively. This increase was contributed by additional rental income from new acquisitions, which more than offset income loss from its divestments. Occupancy levels remain high at 98.7%. Interest costs also saw a dip of 43% yoy due to refinancing at a lower all–in rate of 4.1% (5.9% previously). As a result, distributable income came in at S$12.9m, +19% yoy. DPU was lower by 8.8% yoy due to increased share base from share placement in April’11, but is an improvement from a quarter ago.

Deployment of cash to develop projects/new acquisitions. Cambridge REIT (CREIT) continue s to expand its portfolio with the announcement of the signing of a new built-to-suit project (BTS) at Seletar Aerospace Park View and the acquisition of 25 Pioneer Crescent for a total of S$23.7m. These properties will be leased back on long-term contracts with Air Transport Training College (ATTC) for the former site for 30 years, and the latter for 15 years lease with option to extend for further 15 years. This together with continued asset enhancement program at various properties and other BTS projects, we slightly raised our FY12/13 earnings to account for new acquisitions/BTS projects.

Attractive FY11-13F yield of c10-11%. Ongoing asset recycling by the manager will ensure that CREIT’s portfolio remain fresh and relevant. Gearing of 33% is comfortable and with no debt refinancing over the next 2 years. The credit & risk profile of CREIT has vastly improved compared to GFC period in 2008-09. Prospective FY11-12 DPU yield of 9.5-11.1% is attractive. Maintain BUY with revised TP of S$0.58 as we roll forward our numbers to FY12.