Global Logistic Properties - DBS Research 2016-11-09: In pursuit of growth

Global Logistic Properties - DBS Vickers 2016-11-09: In pursuit of growth GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties - In pursuit of growth

  • 1H17 results driven by higher revenue and development completions.
  • Exceeded own expectations by meeting 64% of full-year development profit target.
  • Achieved close to 50% of full-year targets for development starts and completions.



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 the cautious outlook is priced in.


1H17 results driven by higher rental income, management fees and development completions; core results in line. 

  • Core 1H17 net profit (excluding revaluation gains and one-off items) grew 36% y-o-y to S$137m, in line with street’s FY17 estimates, led by higher rental income mainly from Japan (+21%) and US (+67%) and higher management fees from Japan (+47%) and US (+165%). 
  • In 1H17, GLP recorded development profit of US$128m at 30% margin (vs 27% in FY16), achieving 64% (ahead) of its full-year target of US$200m. GLP achieved 42% and 46% of its development starts and completion targets respectively. 
  • Management has turned positive on Brazil, and cautiously positive on China, while Japan and US continue to show strong demand.


AUM of fund management platform rose to US$38bn. 

  • As at 1H17, total AUM had risen to US$38bn, 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 a 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 | http://www.dbsvickers.com/ 2016-11-09
DBS Vickers SGX Stock Analyst Report BUY Maintain BUY 2.470 Same 2.470




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