GLOBAL LOGISTIC PROP LIMITED
MC0.SI
Global Logistic Properties - Strong development profit and fee income
- 1QFY17 core net profit of US$69m in line, 25% of our FY17 forecast.
- Japan and the US continue to perform strongly.
- China facing some short term oversupply headwinds.
- Robust fee income growth, strong balance sheet capacity.
- Maintain Add with unchanged RNAV-based target price of S$2.72.
Results in line, accounting for 25% of our FY17 core net profit
- 1Q17 revenue rose 9% yoy to US$207m, net profit fell 24% yoy to US$203m on lower revaluation surplus, forex impact, partly offset by better operating results. Excluding revaluations, bottomline of US$69m, +23% yoy, is in line with our expectations.
- Although portfolio occupancy fell on slower leasing in China and Brazil, same-store NOI and rent growth rose c.8% and 9.6% on higher leasing demand of 2.5m sq m. There was higher development profit of US$65m, largely from Japan and increased fee income.
Strong performance from Japan and the US
- Japan and the US performed strongly with rent growth of 2.1%/20.7% while occupancy was high at 94-99%. There was added operating and fee income from its share of GLP US Income Partners II.
- Given the strong sector fundamentals in the US, we expect the strong performance to continue.
- In Japan, it has achieved 16%/58% of its development starts and completions and this will underpin rental and development income.
China faces some near term headwinds
- New and renewed leases in China totalled 0.92m sq m in 1Q with a 60% retention ratio.
- Domestic consumption remains the key driver of demand. However, occupancy dipped to 86% on slower leasing volumes. This was offset by effective rent growth of 6.2%, with stronger performance in Tier 1 cities.
- On outlook, there continues to be short term oversupply in Tier 2 cities with drags on rents and occupancy. Management expects this to be digested over the next 12-18 months.
Expanding fee income platform
- Fee income rose 17% yoy to US$42m, on higher asset and property management fees, led by higher AUM of US$36.5m. With an additional US$12bn of uncalled capital, we expect recurrent fee income to continue expanding as this capital is deployed. It is also looking at setting up a China income fund.
Strong balance sheet
- Balance sheet is healthy with look-through net debt to asset ratio of 0.28x. To date, GLP has commenced 20% of its US$2.1bn of development starts and completed 18% of its targeted completion of US$1.5bn. This funding headroom provides the group with deep capacity for development activities as well as to evaluate potential new acquisition opportunities such as in the US.
Maintain Add
- We tweak our FY17-19 estimates for the latest results and leave our RNAV-backed target price of S$2.72 unchanged.
- Given its position as a market leader in China, vast landbank, strong execution track record and expanding fund management platform, we believe GLP will continue to create value and earnings growth.
- Key catalysts are acceleration in fund management activity and improved rental outlook.
- Risk to call includes slower than expected China market.
LOCK Mun Yee
CIMB Research
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YEO Zhi Bin
CIMB Research
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http://research.itradecimb.com/
2016-08-12
CIMB Research
SGX Stock
Analyst Report
2.720
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2.720
