Global Logistic Properties Ltd - OCBC Securities 2015-09-14: Good leasing momentum in China.

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GLOBAL LOGISTIC PROP LIMITED MC0.SI 

Global Logistic Properties Ltd: Good leasing momentum in China 

 New CN leases with 7 customers 

 Positive on share buybacks 

 Volatility driven by CN fears 

Over 210k sqm in new Chinese leases signed last week 

• GLP announced last week that it had signed new leases totaling 90k sqm in China with five customers to meet their demand for business expansion. 
• We understand that the customers were in industries driven by domestic consumption demand, such as auto parts, food manufacturing and third-party logistics providers, and that four of the leases were with repeat customers. This was in addition to an announcement last Monday that GLP had also signed 126k sqm of new lease agreements in China with Best Logistics and SF Express, two leading third-party logistics companies who are amongst GLP’s largest customers by leased area in China. 
• These two companies are expanding with GLP into five cities to meet growing Chinese consumer demand for express delivery services driven by e-commerce. 

Share buybacks are sound moves 

• GLP begun buying back its shares on 3 Aug 2015 and have since went into the market 26 times to purchase approximately 72m shares worth S$163m. (Note that management is authorized to purchase a maximum of 484.4m shares under its buyback mandate.) 
• We are overall positive on the purchases; in our view, if a company’s balance sheet is healthy and the opportunity cost of capital not excessive, buying back undervalued shares is frequently an accretive move for shareholders. 
• With an 9.7% net gearing (as at end Jun 2015) and its current share price trading at a 34% discount to its RNAV, every dollar utilized in buying back shares is exchanged for significantly more than a dollar in intrinsic value. 

Share price volatility driven by Chinese fears 

• Similar to other developers with meaningful exposure to China, GLP’s share price has been lackluster in a volatile market plagued by fears of a Chinese hard landing. More price volatility ahead would not surprise us, particularly as we draw closer to the Sep FOMC meeting, but our fundamental view of the company remains constructive. 
• Maintain BUY with an unchanged fair value estimate of S$3.07. 

Eli Lee | http://www.ocbcresearch.com/ OCBC Securities 2015-09-14

BUY Maintain BUY 3.07 Same 3.07