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It has been many years since I blogged about Cache Logistics Trust in more detail.
After partially divesting my investment in the Trust a few years ago, I have not really looked at it as I decided back then that they were not friendly to retail investors like me.
Many share placements over the years have diluted the NAV per unit and although total revenue has increased, DPU has reduced. For a retail investor (for income), it is not good for me.
I searched my blog's archives and the last time I really blogged about Cache Logistics Trust was in 2012.
NAV per unit was 90c then in 2Q 2012.
It was 77c in 2Q 2017.
DPU was 1.981c then in 2Q 2012.
It was 2.086c the quarter before.
It was 1.8c for 2Q 2017.
Gearing level was at 27.5% then in 2Q 2012.
It was 43.4% in 2Q 2017.
Interest cover ratio was 7.5x then in 2Q 2012.
It was 4.0x in 2Q 2017.
With gearing level much elevated, some form of equity fund raising is not unexpected.
The manager did say in their 2Q 2017 presentation that they wished to achieve a lower leverage ratio and the Trust just announced an 18 for 100 rights issue at 63.2 cent per rights unit.
See 2Q 2017 presentation: HERE.
I have said before that I like rights issues if funds are being used to generate more income and hopefully they are DPU accretive.
However, rights issues to strengthen the balance sheet means a lower DPU and we should expect DPU to drop by a few per cent after this rights issue is over, everything else remaining equal.
Yes, this rights issue is to strengthen the Trust's balance sheet.
After suffering a string of dilution in the value of their investment in the Trust and receiving lower DPU over time, now, retail investors are being asked to cough up some of those reduced distributions they received to help strengthen the balance sheet.
Why don't they do another private placement which was something they did so well before?
OK. I know. I am complaining.
Hey, I am Singaporean!
Complaining is something I can do quite well but I like to think that I am not being unreasonable.
Anyway, after the rights issue, gearing level will reduce significantly from 43.4% to 35.5%.
Let us hope they do not squander a stronger balance sheet. Crossing fingers (and toes).
See announcement: HERE.
See time table: HERE.
Related post:
Cache Logistics Trust 2Q 2012 DPU reduced.
Bloggy Award
14 comments:
Hi AK,
Are you planning to subscribe to it or renounce it?
Hi Kevin,
It has to be a basket case for me to renounce the rights issue. :p
As it is still generating an income for me, I will take part. :)
Hi AK, do you know where and how we can purchase the rights?
I checked on the ATM but dont have. Thanks.
Hi Damien,
If you are eligible, you will receive a package in the mail from CDP with instructions.
You might want to wait for it.
Hi AK,
I believe they will be on a buying spree very soon to "beef up" the "return" for investors 😀
Hi redponza,
I wouldn't be surprised but whether it will beef up returns for investors is hard to say.
Even before this, they were on a buying spree which beefed up their fees but not the dividends for investors.
The belief that the management was mediocre and not investor friendly was a big reason for reducing my stake in the REIT years ago.
Although the REIT's performance has not inspired much confidence in recent years, I hope your faith in the management is not misplaced.
Jonathan Ang Wei Shan:
Hi AK, I'm new to this and I want to ask, in the event if one person wants to take part in CUM rights, how does SGX allow retail investors to do it?
AK:
If you are eligible to take part in the rights issue, you will receive a package from the CDP soon.
Jonathan Ang Wei Shan:
Lets say if I dont own any shares at all, but I want to take part in the CUM rights, will I be able to do it? Assuming some present shareholders dont want to take part and there are "leftovers".
AK:
If you are referring to excess rights, no, you cannot apply for these unless you are a shareholder who is eligible for the rights issue.
Hi AK,
I just received the package from the CDP and payment for the subscription of the units is strictly by cashier's order only. Troublesome hor? No ATM/internet banking option. How is the usage of cashier's order proceeding towards a smart nation? -_-""""
Hi Kevin,
Really? This is very troublesome. :(
Hi AK,
Sorry I read wrongly again. ATM option is available.
Something is wrong with my reading today. ;(
Hi Kevin,
DBS/POSB, UOB and OCBC ATMs. All OK. ;)
Hi Ak,
Thank you for your comments.
I was naive.
I thought this REIT was managed by ARA & the REIT Mgmt should be good.
Another lesson learnt...
David
Hi AK,
Thank you for your comments.
I was naive in thinking that this REIT is managed by ARA & should be "Good".
David
Hi David,
I hope they pull up their socks.
John Lim, in a recent interview, said some rather promising stuff about CLT. Something about how they care about minority shareholders too.
Time will tell. ;)
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