GLOBAL LOGISTIC PROP LIMITED
MC0.SI
Global Logistic Properties - Robust leasing demand
- 2QFY3/16 EPS slightly below, accounting for 18% of our FY16 estimate.
- China operations benefited from new-builds and rent growth; more completions in 2H.
- Weak currency continues to be a drag on Japan earnings on translation.
- Strong performance in the US while Brazil impacted by lower asset values.
- Maintain Add with a lower RNAV-based target price of S$3.18.
China continues to drive earnings
- GLP reported a 2% yoy dip in revenue to US$189.3m on lower ¥-sourced income from assets sales to GLP J-REIT and weaker currency, deconsolidation of income from GLP Brazil Income Partners II (pared its stake to 40%), partly offset by higher contributions from China and fee income from its US portfolio.
- PBT rose 32% yoy due to a low base in FY15 from the absence of a one-off loss on cumulative exchange differences.
- Headline PATMI rose 27% yoy to US$114m (excl. revals at US$49.7m).
New completions to be back-end loaded
- Excl. revals, China contribution grew 27% yoy, buoyed by income from new-builds. The group signed 1m sqm of new leases and rent renewal growth was 8.6%; occupancy rose 1%pt qoq to 89%.
- However, tenant retention was lower at 60%.
- Development completions are likely to be back-end loaded as only c.20% of its FY16 completions target was met as at end-2Q.
- We believe the focus would be to keep occupancy stable, at 88-89%, and rent incentives should remain a little elevated in the near term.
Strong operations in Japan but hit by weaker currency
- Japan experienced a record quarter of new leases, totaling 0.322m sqm on 14% rent growth on renewal with occupancy ticking up to 99%.
- GLP is on track to meet its development starts target of US$980m, with plans to build GLP Nagareyama. This will continue to underpin value creation, with a development margin of c.20-25%.
Brazil impacted by cap rate expansion, US continues to deliver
- Brazil saw a 1% point increase in lease ratio to 95% with same-store rent rate up 6.8% yoy, thanks to robust domestic consumption. However, a 65bp cap rate expansion resulted in a valuation deficit of US$28m.
- US income will be boosted in 3Q by a US$35m syndication gain, following the reduction of its stake in GLP US Income Partners I to 10%. Acquisition of GLP US Income Partners II is expected to complete in Nov 15 and syndication and paring of its stake to 10% is likely to be done by Apr 16.
Maintain Add
- The longer-term prospects of the modern logistics warehouse sector remain intact in GLP’s key markets, led by strong domestic consumption and the lack of modern space.
- In addition, growing AUM would result in higher fee income and boost ROEs in the longer run.
- We raise our FY16 forecast to include the latest round of revaluation surplus and tweak our FY17-18 numbers marginally.
- Maintain Add with a sum-of-parts RNAV target of S$3.18.
LOCK Mun Yee
CIMB Securities
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http://research.itradecimb.com/
2015-10-30
CIMB Securities
SGX Stock
Analyst Report
3.18
Down
3.25
