Global Logistic Properties - Phillip Securities 2016-02-05: Delivered as expected

GLOBAL LOGISTIC PROP LIMITED MC0.SI

Global Logistic Properties Limited - Delivered as expected

GLP posted its 3Q16 results before market opening on 3 February and we tuned in for an analyst conference call.

On the portfolio level, lease ratio maintained at 93% while new and renewal leases were up 22% in 3Q16 despite economic headwinds in portfolio’s key markets.
Average same-property NOI across the board gained 6.2% YoY.

Fund management fees were up 19% YoY to US$37m bolstered by higher AUM of US$32b (3Q15:$12.3b). A sum of US$516m of developments were completed in 3Q16, generating a 27% value creation margin, in line with GLP’s benchmark of 25%.

Currently, ~2/3 of GLP’s portfolio in China is leased to 3rd party logistic providers (3PL).
As more companies are geared towards maintaining operating efficiency and costs, the outsourcing of logistic functions to 3PL becomes more apparent, thereby boosting the demand for logistics space.
Additionally, the consolidation of smaller business entities would also boost demand for logistics space.

The group has met 55% and 66% of the planned development start and completion targets for FY16 respectively. The slower development progress was largely stemmed from China.
Management remains confident on meeting full year development targets, citing that planned completions in 3Q16 will be rolled into the next quarter, as a result of delays in obtaining the required regulatory permits in China.

Management stated that the monetisation of China assets, involving spinning off assets into a fund is in discussion.
We view this move as a positive catalyst to unlock value for shareholders, considering that China assets currently occupies the lion share (~59%) of GLP’s NAV.

We remain positive on GLP’s ability to deliver as the growing domestic consumption in key markets continue to kindle the demand for logistics space, coupled with strong results in China.
The possible monetisation of China assets is one of the key catalysts to look out for in the coming quarters.
Overall, the results were largely in-line with our expectations, and we maintain BUY, with a slightly lower target price of $2.43 (previously $2.48) based on 1X FY16F RNAV, reflecting a higher debt position, attributable to a short-term loan that was drawn between Nov and Dec-15.

Peter Ng Phillip Securities | http://www.poems.com.sg/ 2016-02-05

Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 2.43 Down 2.48