GLOBAL LOGISTIC PROP LIMITED
MC0.SI
Global Logistic Properties - Slowing down near-term development pace
- 4Q and FY3/16 core net profit were in line, making up 21% and 98% of our full-year forecast, respectively.
- Portfolio occupancy was 92% in FY16, with leasing activity up 23% yoy.
- Rent growth momentum in China slowed but US continued to outperform in FY16.
- We are lowering our FY17 development start and completion targets by 25-29%.
- Maintain Add, with a slightly lower target price of S$2.72.
4Q results supported by higher China and US, development gains
- GLP’s reported 4Q and FY16 net profit of US$153m and US$719m, up 46-48% yoy. Excluding revaluation, 4Q/FY16 bottomline was US$52m/US$241m, +20%/-21% yoy.
- The better results came from higher contributions from China and the US, as well as development gains from Japan. BVPS benefited from c.US$650m attributable fair value gains due to a 10-40bp cap rate compression and c.US$255m (pretax) of development value creation, raising BV to US$1.87/share.
- GLP proposed a final DPS of 6 Scts.
Portfolio occupancy at 92%
- Portfolio-wide, GLP signed 9.8m sq m of new and renewal leases, +23% yoy, with average lease ratio of 92% and same-store NOI growth of 6.9%.
- In China, it re- contracted 5.9m sq m of leases on effective rent growth of 2.9%, with demand from FMCG, retail, e-commerce and auto parts tenants.
- While incentives were still elevated in 4Q, management indicated that there appears to be some stabilisation.
Bulk of GLP’s portfolio is well located in high absorption areas
- On outlook, while there are pockets of oversupply in Chengdu, Tianjin and Wuhan with continued pressure on rents and higher vacancies, these made up only c.11% of GLP’s portfolio at end-FY16.
- Major cities such as Shanghai, Beijing, Shenzhen, Suzhou and Guangzhou are still enjoying strong absorption rate and these accounted for c.57% of GLP’s portfolio.
- We believe that GLP will continue to optimise returns from this portfolio.
US continues to outperform
- In Japan, FY16 effective rent growth was robust at +5.5% yoy despite lower retention ratio of 69%.
- The US powered on, with high occupancy of 94% and effective rent growth of 19.1%. Given strong sector fundamentals and management platform in place in the US, GLP is likely to continue to look for opportunities to expand its presence there.
Toning down forward development activities
- GLP has set more cautious FY17 development starts and completion targets of US$2.1bn and US$1.5bn (-25% to -29% yoy).
- China will continue to see the most activity (US$1.4bn starts and unchanged US$1.2bn completions). Given weaker demand, GLP has set a more conservative target of US$50m starts and completions for Brazil.
- With AUM of US$35bn, of which US$11bn is uncalled capital, GLP is well placed to expand its fee income business. It is also looking to set up a China income fund.
Maintain Add
- We lower our FY17-18 EPS by 4-16% to reflect the slower pace of near-term activity and introduce FY19 forecasts.
- Given its position as market leader in China and vast landbank, we believe GLP will continue to set the pace of activity and pricing in China.
- Key catalysts are acceleration in fund management activity and stabilisation in rental income base.
- Maintain Add, with a lower target price of S$2.72, at parity with RNAV.
LOCK Mun Yee
CIMB Securities
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YEO Zhi Bin
CIMB Securities
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http://research.itradecimb.com/
2016-05-19
CIMB Securities
SGX Stock
Analyst Report
2.72
Down
2.74
