Global Logistic Properties - In pursuit of growth
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 0.9x 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.
- 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 0.9x 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.