Global Logistic Properties - DBS Research 2016-09-14: Tightening its grip in the US

Global Logistic Properties - DBS Vickers 2016-09-14: Tightening its grip in the US GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties - Tightening its grip in the US

  • Acquisition of a US$1.1bn portfolio in the US.
  • Properties located in markets of Dallas, Chicago and Atlanta which are key growth markets in the US.
  • BUY call maintained , TP S$2.47.



Value at current prices. 

  • We maintain BUY on Global Logistics Properties (GLP) with TP of S$2.47, pegged at 30% discount to RNAV to reflect ongoing uncertainties in the operating environment. 
  • Trading at 0.8x P/BV, below the lower end of historical range, we believe that negatives of a cautious outlook is priced in.


Deepening presence in US. 

  • We are positive on GLP’s announcement of a US$1.1bn (at valuation) logistics portfolio in the US from Hillwood, a property developer. The acquisition will be in various tranches – initial closing of US$700m is fully leased and income producing by end of December 2016 and the remaining US$400m, when the target properties under development complete and achieved pre-agreed lease ratios.
  • GLP intends to pare down their effective stake in this portfolio to 10% upon syndication to third-party capital partners. Assets are located in key markets of Dallas, Chicago and Atlanta, which according to Colliers, have one of the brightest outlook for absorption and rental growth in the US.


AUM of fund management platform rose to US$36.5bn. 

  • As at 1Q17, total AUM had risen to US$36.5bn, and the group has another US$12bn of uncalled capital, expected to be deployed in the next two years. 
  • Given that this business is a highly scalable and an ROE-enhancing business arm of the group, management is focusing on driving returns and operational scale by establishing new funds.


Valuation

  • We maintain our BUY call and target price of S$2.47, pegged at 30% discount to RNAV. 
  • Despite a weaker outlook, we believe the current share price, which is at 0.8x P/BV, below the lower end of historical range, is attractive.


Key Risks to Our View

  • Faster-than-expected ramp-up in competing supply on the back of a slowdown in China's retail sector would impact demand for logistics warehouses.




Rachel Tan DBS Vickers | Derek Tan DBS Vickers | Mervin SONG CFA DBS Vickers | http://www.dbsvickers.com/ 2016-09-14
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.47 Same 2.470

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