Cache Logistics Trust to be gobbled up by Mapletree Logistics Trust?

Analysing Cache Logistics Trust is not easy. And it is not because of its business scale. In fact, with only 27 properties, Cache Logistics Trust is the smallest player among Ascendas REIT and Mapletree Logistics Trust. The difficulty in understanding Cache Logistics Trust is because the past two years had been such a whirlwind for this S-REIT that one wonders how on earth this S-REIT managed to stay the course till now.

When debt-laden HNA Group acquired the previous Sponsor of Cache Logistics Trust (CWT Limited) in 2017, it was a sign of things to come. In 2018, CWT sold off all its stake in Cache Logistics Trust to the manager, ARA. Currently, ARA is the largest shareholder of this S-REIT, with stake amounting to 9.6%.

Cache Logistics trust

With a market capitalization of merely $783 million, Cache Logistics Trust is considered a very small S-REIT. Given the current low market valuations and challenging operating environment, consolidation is inevitable in the S-REIT sector. In my view, Cache Logistics Trust could be an interesting acquisition for Mapletree Logistics Trust. After all, the latter splashed out a whopping $730 million in 2018 to acquire five ramp-up warehouses, which is a niche occupied by Cache. Forking out another $780 million or so would not be a challenge for Mapletree Logistics Trust as it has a deep-pocket backer in Temasek Holdings.

For sure, an acquisition by Mapletree Logistics Trust would be a catalyst for unit price of Cache Logistics Trust, which had been battered by a series of unfortunate events for the last two years. Let’s examine this interesting S-REIT and see if it is worth to invest.

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Cache Logistics Trust in bizarre narrative

During IPO in 2010, CWT Limited had granted right of first refusal to Cache Logistics Trust over the properties that it owned. However, with the exit of CWT Limited, that right has lapsed. In the blink of an eye, the growth prospect for Cache Logistics Trust looked scary. Without a Sponsor to transfer assets, there appears to be limited opportunities for expansion. Indeed, Mapletree Logistics Trust wasted no time in going for the kill when it acquired five warehouses which were previously under Cache’s Right of First Refusal granted by CWT.

But the exit of CWT turned out to be a blessing in disguise for unitholders of Cache Logistics Trust as CWT International shocked the market with [This is a premium article. The rest of the content is blocked and can be accessible by SG Wealth Builder Members only. To read the full content, please sign up as member.]

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Updated: September 19, 2019 — 6:06 am

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