Global Logistic Properties Ltd - OCBC Investment 2016-02-04: Domestic consumption is key driver

Global Logistic Properties Ltd - OCBC Investment 2016-02-04: Domestic consumption is key driver GLOBAL LOGISTIC PROP LIMITED MC0.SI 

Global Logistic Properties Ltd: Domestic consumption is key driver 

 3QFY16 earnings in line 
 90% of portfolio attributed to domestic consumption 
 Healthy operating numbers from China 

3QFY16 ex-revaluation earnings up 26% YoY to US$83m 

  • GLP reported that its 3QFY16 PATMI increased 63.8% YoY to US$184.2m mostly due to higher contributions from JVs/associates, gains from the syndication of its 45% interest in GLP US Income Partners I in Oct 2015 and higher fair value gains on its properties, partially offset by higher finance costs as GLP recognized mark-to-market losses of foreign exchange contracts and incurred higher interest expense from its USD MTN bond. 
  • In terms of the topline, 3QFY16 revenues increased 11.1% YoY to US$198.9m mainly due to completion and stabilization of development projects in China with increasing rents, the inclusion of management fee income from GLP US Income Partners I, partially offset by the syndication of the group’s 60% stake in GLP Brazil Income Partners II, the absence of contributions from 5 Japanese properties sold in Sep15 and FX translation losses from a weaker JPY and RMB against the USD. 
  • On an evaluation basis, 3QFY16 adjusted PATMI increased c.26% YoY to US$83m from US$66m in 3QFY15, and we judge this quarter’s numbers to be broadly in line with expectations. 

Performance driven by long term growth in domestic consumption 

  • Management reiterates that 90% of its overall portfolio is driven by domestic consumption in its key markets, which remains stable even in times of slower economic growth. 
  • The group’s lease ratio in China was stable at 88% as at end 3QFY16 while same property NOI growth and effective rent growth on renewal leases increased 7.1% and 2.5% YoY respectively. 
  • Asset values also increased in China with cap rates down 25 bps in mid-tier cities while 1.4m sqm of new and renewal leases were signed in 3QFY16, up 27% YoY. 
  • Same-property net operating income also increased 2.2% in Japan, 7.2% in Brazil and 8.1% in the US over the quarter. 
  • Our fair value estimate dips to S$2.68, versus S$3.07 previously, as we incorporate higher discount rates into our valuation model to reflect weaker macro-economic outlooks in GLP’s key markets and increased operating risks while the group executes its strategy in more uncertain conditions ahead. 
  • Maintain BUY. 

Eli Lee OCBC Securities | http://www.ocbcresearch.com/ 2016-02-04
OCBC Securities Analyst Report BUY Maintain BUY 2.68 Down 3.07